Stock Market Today: Fed’s Rate Cut Sparks Volatility Amid Fewer 2025 Reductions
Market Indexes React to Federal Reserve’s Latest Move
On Thursday, December 19, 2024, the stock market is experiencing significant volatility following the Federal Reserve’s decision to cut interest rates while signaling fewer rate reductions for 2025 than previously anticipated. This development has sent ripples through major market indexes and individual stocks alike.
The S&P 500 (^GSPC) opened slightly higher, up 0.4% in early trading, as investors digested the implications of the Fed’s announcement. Similarly, the Dow Jones Industrial Average (^DJI) showed a modest gain of 0.3%, attempting to recover from its longest losing streak since 1974. The tech-heavy Nasdaq Composite (^IXIC) also edged up by 0.3%, reflecting the mixed sentiment across the market .
Federal Reserve’s Rate Decision and Market Impact
The Federal Reserve cut its benchmark interest rate by 25 basis points to a target range of 4.25% to 4.5%, marking the third consecutive rate reduction this year. However, the central bank’s projection of only two rate cuts in 2025, down from the four previously anticipated, caught many investors off guard .
This more hawkish outlook from the Fed has led to a surge in Treasury yields, with the 10-year yield climbing to 4.52%, its highest level in over six months. The rise in yields poses a potential headwind for stocks, particularly those trading at elevated valuations .
Major Stock Movements and Corporate News
Several notable stocks are making headlines today:
1. Nvidia Corporation (NVDA): The AI chip giant’s shares surged nearly 4% in early trading, rebounding from recent losses that had pushed the stock into correction territory .
2. Apple Inc. (AAPL) and Meta Platforms Inc. (META): Both tech giants saw slight gains in the morning session, bucking the overall market trend .
3. Tesla Inc. (TSLA), Microsoft Corporation (MSFT), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), and Broadcom Inc. (AVGO): These tech heavyweights experienced minor losses as the market grappled with the Fed’s decision .
4. Micron Technology Inc. (MU): The chipmaker’s stock rose 1.5% ahead of its quarterly earnings report, scheduled for release after the closing bell .
Upcoming Market Events and Economic Indicators
Investors are closely watching several key events that could impact market performance in the coming days:
1. Bank of England Rate Decision: The BoE is expected to maintain its current policy rate, with an announcement due later today .
2. Bank of Japan Policy Meeting: The BoJ kept its benchmark rate at 0.25%, as anticipated, but market participants are speculating about a potential rate hike in January 2025 .
3. U.S. Economic Data: Upcoming reports on jobless claims, housing starts, and manufacturing activity will provide further insights into the health of the economy.
4. Corporate Earnings: As the fourth quarter draws to a close, investors will be keenly watching for earnings reports from major companies to gauge the overall business climate.
Market Outlook and Analyst Perspectives
The market’s reaction to the Fed’s decision has been mixed, with some analysts expressing concern about the potential impact of higher interest rates on stock valuations.
Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, stated, “Rates are the biggest risk for markets from here on out. The reacceleration of inflation is causing [the Fed] to really have to rethink all the progress” .
However, Jason Draho, head of asset allocation Americas at UBS Global Wealth Management, remains optimistic, noting that the Fed still expects to cut rates, which is generally positive for equities. UBS maintains a S&P 500 price target of 6,600 by the end of 2025, representing a potential 12% upside from current levels .
As the market digests the latest Fed decision and looks ahead to 2025, investors should remain vigilant and prepared for potential volatility. The interplay between interest rates, corporate earnings, and economic indicators will continue to shape market dynamics in the coming months.
