The Federal Reserve turns hawkish, U.S. stocks plummet! Nasdaq crashes 3.5%, Dow Jones drops over a thousand points

Market Overview

The Federal Reserve adopted a hawkish stance, leading to a significant drop in U.S. stocks, with the Dow Jones falling over 1,000 points, marking its longest losing streak since 1974 with ten consecutive declines. The S&P fell nearly 3%, the largest drop on a rate cut day since 2001, and the Nasdaq dropped over 3%. Tesla fell more than 8%, leading the decline among tech giants. Chip stocks dropped nearly 4%, with Broadcom down nearly 7%, and Nvidia, which rose nearly 5% during the day, turned negative. Micron Technology, which provided disappointing guidance for the current fiscal quarter, saw its stock drop over 17% in after-hours trading.

The Federal Reserve sharply cut interest rate expectations, raising concerns that it would not continue to lower rates quickly. The U.S. dollar index rose over 1% to a two-year high, while the offshore yuan fell by 400 points, breaching 7.32 to reach a one-year low. U.S. Treasury yields increased, with yields on multiple maturities rising by 10 basis points.

Gold prices plummeted, dropping over 2% to a one-month low. Oil prices surged and then retreated, with U.S. oil rising nearly 2% during the day but gradually erasing gains after the Fed's rate cut. Bitcoin crashed over $6,000, briefly falling to nearly $100,000.

Federal Reserve Adopts Hawkish Stance, Significantly Raises Inflation and Interest Rate Forecasts

The Federal Reserve cut rates by 25 basis points as expected, while raising future policy rate and inflation forecasts, now expecting only two rate cuts totaling 50 basis points next year, lower than previous expectations. Powell's hawkish remarks indicated that the Fed is cautious about further rate cuts, emphasizing the need to see new progress in combating inflation. Some officials voted against the rate cut, leading to rising Treasury yields and the dollar, while non-U.S. currencies, gold prices, and U.S. stocks plummeted. The Dow Jones fell over 1,100 points at one point, unable to escape a ten-day losing streak, the longest since 1974.

Previously, the market anticipated that the Fed would continue to cut rates significantly next year, further boosting U.S. stocks. However, the Fed's cautious stance triggered a surge in Treasury yields, with the 10-year Treasury yield rising above 4.50% at one point, putting pressure on the stock market. Following the release of the Fed's dot plot and economic projections, risk aversion surged, causing U.S. stocks to plunge and close near the day's lows. The Dow fell nearly 1,150 points, the S&P dropped over 3%, the Nasdaq fell over 3.8%, and small-cap stocks dropped over 5%.

Powell: "Close to or Already at" the Point of Slowing or Pausing Rate Cuts, Future Cuts Will Require New Progress on Inflation

Powell stated that the decision to cut rates at this meeting was "quite difficult." The risks the Fed faces in achieving its dual mandate of controlling inflation and promoting employment are roughly balanced, with significant progress made in controlling inflation. Although rates have been cut by 100 basis points, they still "significantly" suppress economic activity, and the Fed is "on track to continue cutting rates." However, before further cuts, officials need to see more progress on inflation. Additionally, Powell mentioned that the new U.S. government's policies have not yet been formally introduced, but the Fed has done considerable preparatory work, allowing for a more careful and thoughtful assessment and appropriate policy responses when specific policies are finally seen In his opening remarks, Powell stated that the U.S. economy appears to be performing strongly overall and has made significant progress toward the Federal Reserve's goals over the past two years. The labor market has cooled from its previously overheated state but remains robust. Inflation levels are now closer to the Federal Reserve's long-term target of 2%.

He indicated that to better fulfill the Federal Reserve's dual mandate of supporting employment and controlling inflation while maintaining economic stability, the Federal Open Market Committee decided to take further measures by lowering the policy rate by 25 basis points to reduce the degree of policy restriction. Additionally, the Federal Reserve has decided to continue reducing its securities holdings.

Powell noted that recent indicators suggest that economic activity continues to expand at a steady pace. The annualized growth rate of U.S. GDP in the third quarter was 2.8%, roughly the same as the growth rate in the second quarter. Consumer spending growth remains strong, and investment in equipment and tangible assets has increased. However, activity in the housing sector has shown weakness.

"Tech Seven Sisters" Plummet

(1) Tesla fell 8.28%, with analysts from investment banks Wedbush and Mizuho raising Tesla's target price to $515, over 7% higher than the current level, which is the highest target price given by Wall Street analysts. (2) Amazon fell 4.6%. (3) Microsoft fell 3.76%. According to estimates from analysis firms, Microsoft purchased 485,000 NVIDIA Hopper chips this year, far ahead of Meta's 224,000, ByteDance's 230,000, Tencent's 230,000, Amazon's 196,000, and Google's 169,000. Analysts believe that in the first two years, NVIDIA's GPUs were in short supply, and Microsoft's chip inventory gives it a competitive edge in building next-generation AI systems. (4) Google A fell 3.59%. (5) Apple fell 2.14%, halting its attempts to create an iPhone hardware subscription service that began around 2022. (6) Meta fell 3.59%. (7) NVIDIA rose over 4.8% before falling 1.14%. Citigroup maintained a "Buy" rating on NVIDIA and set its target price at $175, indicating about 34% potential upside for NVIDIA. The total addressable market (TAM) for AI accelerators is expected to reach $380 billion by 2028.

Micron Technology's Q1 Revenue Meets Expectations, Outlook for Next Quarter Significantly Poor, Plummets 17% After Hours

Despite the company turning a profit year-on-year, with revenue soaring 84% to a record high that met expectations, data center revenue exceeded 50% of total revenue for the first time, and data center revenue grew over 400% year-on-year and 40% quarter-on-quarter to a record high, the guidance for revenue in the next quarter was significantly weak, leading to a drop of over 17% after hours.

Earnings Guidance:

Revenue: For the second fiscal quarter of 2025 ending in February next year, revenue is expected to be in the range of $7.7 billion to $8.1 billion, significantly weaker than analysts' expectations of $8.99 billion.

Profit: The adjusted earnings per share for the next fiscal quarter is expected to be between $1.33 and $1.53, significantly weaker than analysts' expectations of $1.91.

Quantum Computing Concept Stocks Show Mixed Performance, Quantum Rises Over 150%

Quantum Corporation (QMCO) closed up 153.04%, Quantum Computing (QUBT) rose 52.95%, D-Wave Quantum (QBTS) increased by 6.67%, Honeywell (HON) closed down 2.69%, IBM fell 3.84%, Rigetti Computing (RGTI) dropped 3.95%, and IonQ (IONQ) decreased by 14.46%.

Sezzle Shorted by Hindenburg

Hindenburg claimed to short the payment fintech company Sezzle (SEZL), which triggered a temporary trading halt due to excessive volatility, with a decline of 21.32% before the suspension