Suddenly plummeting.
On December 18th local time, all three major US stock indexes closed down. As of the close, the Dow Jones Industrial Average fell 2.58%, the Nasdaq fell 3.56%, and the S&P 500 index fell 2.95%.
The Federal Reserve announced a 25 basis point reduction in the target range for the federal funds rate, to between 4.25% and 4.50%. Federal Reserve Chairman Powell stated at a press conference that the Fed is approaching the moment of slowing down interest rate cuts and will make further decisions based on economic data in the future. Powell also stated that the Federal Reserve is not allowed to own Bitcoin and has not sought to amend laws regarding the ability to hold Bitcoin.
Bitcoin fell more than 5% within the day. According to Coinglass data, in the past 24 hours, over 250000 people across the cryptocurrency network have been liquidated, with a total liquidated amount of 697 million US dollars.
Powell: Approaching the time to slow down interest rate cuts
On December 18th local time, all three major US stock indexes closed down. As of the close, the Dow Jones Industrial Average fell 1123.03 points, or 2.58%, to 42326.87 points; The Nasdaq fell 716.37 points, a decrease of 3.56%, to 19392.69 points; The S&P 500 index fell 178.45 points; The decline was 2.95%, to 5872.16 points.
On that day, the S&P 500 index fell below 6000 points, marking the largest single day decline in four months; The Nasdaq experienced its largest daily decline in nearly 5 months; The Dow Jones Industrial Average fell over a thousand points during the day, marking its 10th consecutive day of decline and the longest continuous decline since October 1974. The fear index VIX rose as much as 78% during the day and temporarily closed at 28.32 after the US stock market closed. Large tech stocks fell across the board, with Tesla falling over 8% and Intel falling over 5%. Micron Technology expects adjusted revenue of $7.7 billion to $8.1 billion in the second quarter, with analysts expecting $8.99 billion. The US stock market fell more than 18% after trading.
On the news front, the Federal Reserve announced a 25 basis point reduction in the target range for the federal funds rate, to between 4.25% and 4.50%. This interest rate cut marks a new stage in the Federal Reserve's monetary policy. Chairman Powell stated at a press conference that the Fed is approaching the moment of slowing down interest rate cuts and will make further decisions based on economic data in the future.
The Federal Reserve's FOMC statement indicates that it is expected to cut interest rates by 50 basis points to 3.9% in 2025, and another 50 basis points to 3.4% in 2026. The Federal Reserve's dot matrix chart shows that there may be two interest rate cuts in 2025, each by 25 basis points. Powell stated that the Federal Reserve's policy stance has significantly relaxed and will be more cautious when considering further interest rate adjustments.
(Federal Reserve Dot Matrix)
Powell further pointed out that the current expectation of high interest rates is consistent with inflation expectations, and the possibility of a rate hike next year "seems unlikely". He emphasized that the Federal Reserve is entering a new stage of interest rate adjustment, and future interest rate cuts will be based on changes in economic data.
In terms of inflation, the Federal Reserve has raised its median forecast for PCE inflation in 2025, which is expected to rise to 2.5%, up from 2.1% in September. At the same time, the Federal Reserve has adjusted its inflation expectations for the next few years, predicting that the median core PCE inflation from 2024 to the end of 2026 will be 2.8%, 2.5%, and 2.2%, respectively. Powell stated that achieving the inflation target still faces certain challenges, but the Federal Reserve believes that inflation is approaching its target of 2%. He also pointed out that the labor market does not need further cooling to achieve this goal. Despite the high risk and uncertainty of inflation, Powell believes that the Federal Reserve must continue to maintain restrictive policies until inflation falls back to its target of 2%.
The Federal Reserve's economic forecast shows that the median GDP growth rate in the United States from 2024 to the end of 2026 will be 2.5%, 2.1%, and 2.0%, respectively. Powell stated that the US economy is performing strongly, with faster than expected economic growth in the second half of 2024, and there are no signs of an increased risk of economic recession. He also stated that the current labor market conditions are more relaxed than in 2019. Powell stated that there is significant uncertainty regarding the future economic outlook, but overall he remains optimistic about the economy. The Federal Reserve expects that the US economy will continue to grow in the next three years, and the median expected unemployment rates between 2024 and 2026 are 4.2%, 4.3%, and 4.3%, respectively.
The Federal Reserve also announced that it will lower the overnight reverse repo rate from 4.55% to 4.25% and the discount rate from 4.75% to 4.50%. In addition, the FOMC statement also shows that the Federal Reserve will maintain a reduction limit of $25 billion for treasury bond bonds and $35 billion for MBS. Powell emphasized that these adjustments will not affect the overall policy stance of the Federal Reserve.
In other aspects, Powell mentioned that real estate activity remains weak and consumer spending remains resilient. He also pointed out that the Federal Reserve is discussing the potential impact of tariffs on inflation, but has not yet reached any conclusions. Geopolitical instability remains a risk factor of concern for the Federal Reserve. When asked about Bitcoin reserves, Powell stated that the Federal Reserve is not allowed to own Bitcoin and has not sought to amend laws regarding the ability to hold Bitcoin.
Looking ahead, despite the uncertainty of the economy and inflation faced by the Federal Reserve, Powell and other Fed officials have stated that future monetary policy will focus more on data-driven approaches, especially regarding the timing and magnitude of interest rate cuts. Overall, the Federal Reserve's monetary policy is gradually entering a new stage, with the pace of interest rate adjustments slowing down. The economic and inflation development in the coming years will become an important basis for policy adjustments. The probability of the Federal Reserve keeping interest rates unchanged in January exceeds 90%, compared to 81% before the Fed's interest rate decision was announced.
Nick Timirous, the voice of the Federal Reserve, stated that the addition of the phrase "magnitude and timing" in the Fed's policy statement implies a slowdown in the pace of interest rate cuts to modify potential adjustments.
Whitney Watson of Goldman Sachs Asset Management predicts that the Federal Reserve will abandon interest rate cuts in January and then resume loose policy in March.
In other markets, the US dollar index rose sharply, with the US dollar index, which measures the US dollar against six major currencies, rising 1.00% on the day and closing at 108.024 at the end of the foreign exchange market. As of the end of the New York currency market, 1 euro was exchanged for 1.0376 US dollars, lower than the previous trading day's 1.0488 US dollars; 1 pound is exchanged for 1.2593 US dollars, lower than the previous trading day's 1.2711 US dollars.
International oil prices have risen. As of the close of the day, the price of light crude oil futures for January 2025 delivery on the New York Mercantile Exchange has risen by 50 cents, closing at $70.58 per barrel, an increase of 0.71%; The London Brent crude oil futures price for delivery in February 2025 rose by 20 cents, closing at $73.39 per barrel, an increase of 0.27%.
The yield of US treasury bond bonds rose collectively after the Federal Reserve announced interest rate cut, and gold and silver accelerated their short-term downward exploration. Bitcoin's intraday decline widened, falling below $101000 at one point and dropping more than 5% within 24 hours. Coinglass data shows that in the past 24 hours, over 250000 people across the entire cryptocurrency network have been liquidated, with a total liquidated amount of 697 million US dollars.
All 11 major sectors of the S&P 500 closed down
In terms of sectors, all eleven major sectors of the S&P 500 index closed down. Among them, the non essential consumption sector led the decline, with a decrease of 4.74%, the real estate sector fell nearly 4%, and the communication services and financial sectors fell more than 3%.
Popular technology stocks generally fell. Tesla fell over 8%, Broadcom fell nearly 7%, Intel fell over 5%, AMD, Amazon, Arm, Micron Technology fell over 4%, Microsoft, Meta, Google A, Netflix, Qualcomm fell over 3%, AMD Semiconductor, TSMC, Oracle, ASML, Apple fell over 2%, and Eli Lilly, Cisco, Texas Instruments, and Nvidia fell over 1%.
Apple fell 2.14%. According to Bloomberg citing informed sources, Apple announced the suspension of its iPhone hardware subscription service plan, marking the company's abandonment of attempts to change the way consumers purchase iPhones. The plan was originally intended to allow users to replace their iPhones once a year through monthly subscription fees, but due to software vulnerabilities and regulatory issues, the project has been postponed and ultimately terminated. Insiders revealed that the team involved in the project has been disbanded and reassigned to other projects.
Apple's move is part of its payment service strategy adjustment. Previously, Apple also discontinued the "buy now pay later" service and instead guided consumers to use third-party payment plans. Apple plans to increase iPhone sales and drive more sustained revenue through hardware subscription services, while strengthening users' dependence on the Apple product ecosystem. However, this project may conflict with Apple's wireless carrier partners and may replace existing iPhone upgrade plans and Apple Card installment plans. At present, Apple has no plans to restart the project separately, but may seek new partnerships to advance the service.
Microsoft fell 3.76%. OpenAI, supported by Microsoft, has announced a new way to interact with ChatGPT: American users can call 1-800-ChatGPT (1-800-242-8478) for free to have a 15 minute monthly conversation with ChatGPT. In addition, users from other countries can also communicate with the chatbot through WhatsApp. This move is part of OpenAI's global plan to expand the popularity of AI, and may also further enhance the user coverage of its flagship product ChatGPT, which currently has 300 million weekly active users. This release was made during OpenAI's 12 day product live streaming event, during which the company also introduced a higher priced ChatGPT Pro subscription option and began launching an AI video generation tool called Sora.
Arm fell 4.37%, while Qualcomm fell 3.08%. On Wednesday local time, lawyers from Arm and Qualcomm engaged in a heated debate in court regarding a key issue: who owns the intellectual property designed based on Arm's computing architecture. This lawsuit relates to Qualcomm's plan to enter the laptop market, as Qualcomm helps partners such as Microsoft regain market share after iPhone manufacturer Apple launches its own customized chips.
The focus of the debate is whether Nuvia, which Qualcomm acquired for $1.4 billion in 2021, has the right to transfer its computing core design to Qualcomm. Nuvia founder and former Apple engineer Gerald Williams stated that Nuvia's design is not a derivative of Arm technology, while Arm lawyers insist that Nuvia's design involves "modifications" and "derivatives" of Arm technology.
Amazon fell 4.60%. Amazon announced on Wednesday that due to insufficient office space, some employees' resumption dates will be postponed for up to four months. The affected cities include Austin, Dallas, Phoenix, etc., especially some employees in Dallas and Manhattan, who are expected to return to the office in March or April next year. Amazon CEO Andy Jassy previously announced a requirement for employees to fully resume work to rebuild the company culture, but this decision has sparked dissatisfaction among employees, with many expressing a preference for flexible remote work arrangements. In addition, Amazon is also facing a shortage of high-quality office space and has recently rented temporary office space from WeWork.
Financial stocks closed down across the board. Regional finance and Morgan Stanley fell over 5%, while United Bank of America, American Express, UBS Group, Goldman Sachs, and Citigroup fell over 4%. First Capital Financial, Bank of America, JPMorgan Chase, and Travelers Insurance fell over 3%, while Wells Fargo, BlackRock, Visa, Deutsche Bank, Mastercard, and Mizuho Financial fell over 2%. American International Group fell over 1%.
Energy stocks generally fell. US Energy and Brazilian Oil fell more than 5%, Schlumberger fell more than 4%, Chevron, Murphy Oil, Imperial Oil, ConocoPhillips, Shell fell more than 2%, Duke Energy and BP fell nearly 2%, ExxonMobil and Western Petroleum fell more than 1%, and Apache Oil fell 1%.
Most popular Chinese concept stocks closed down, with the Nasdaq China Golden Dragon Index falling 2.41%. NIO and Weibo fell more than 4%, Bilibili and iQiyi fell more than 3%, Alibaba, Miniso, NetEase, JD.com, and Baidu fell more than 2%, Vipshop and Tencent Music fell slightly, and Ideal Auto rose more than 1%.
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