December 18th Market Overview

Happy Wednesday everyone.

Fun fact: Hanukkah and Christmas align on the same day this year. The Holiday season is in full swing!

Bonds are up and equities are down after the Fed has given a more cautionary tone to their 2025 rate cut schedule after today’s meeting. A little disappointing to say the least but I’ll keep positive with Christmas spirit. 🎄

Let's dig in...

Executive Summary

• Federal Reserve cuts rates by 25bps but signals only two rate cuts for 2025, future guidance on cuts below market expectations
  

• Dow heads for historic 10-day losing streak, marking longest decline since 1974
  

• Treasury yields up as January rate cut probability drops to 11%
  

• Mortgage rates climb to 6.95%, up 8 basis points ahead of Fed decision

Market Overview

Key Market Drivers

1. Fed reduces overnight borrowing rate to 4.25%-4.5% target range
   

2. Powell indicates “significantly less restrictive” policy stance, allowing for more cautious approach
   

3. The Fed's "dot plot" showed only two anticipated rate cuts for 2025, which was significantly fewer than the four cuts markets were previously expecting and had partially priced in.
   

4. Sharp decline in January rate cut expectations from over 50% to 11%

Stock Spotlight

• $NVDA emerges from correction territory with ▲ 4% gain, introducing new Jetson Orin Nano Super Developer Kit for AI computing
  

• $JBL up ▲ 9.5% on earnings beat and strong guidance for upcoming quarters
  

• $GIS drops ▼ 2.6% after lowering forward guidance
  

• $MSCI receives Goldman Sachs upgrade with 18% upside potential, citing improving buy-side conditions

Big Name Updates

• $TSLA: Manufacturing VP departure offset by Baird’s PT raise to $480, citing Cybercab fast-track and Trump ties
  

• $AMZN: Bernstein names top pick for 2025, raises PT to $265
  

• $GOOGL: JPMorgan lifts PT to $232, Omdia Research notes growing TPU market share
  

• $MSFT: Financial Times reports company doubled $NVDA AI chip purchases versus competitors

Other Notable Company News

• $MA unveils $12B share buyback program and boosts quarterly dividend by 15% to $0.76
  

• $MRK secures exclusive global license for Hansoh’s oral GLP-1 obesity drug candidate
  

• $BA resumes full production of 737, 767, and 777/777X aircraft after 33,000-worker strike
  

• $PFE expects minimal vaccine policy changes under incoming administration

Sector Watch

Bond Market

Treasury yields spiked following Powell’s comments on future rate cuts. Mortgage rates increased ahead of the Fed meeting, with the 30-year fixed rate rising to 6.95%.

The bond market reaction suggests a recalibration of 2025 rate expectations.

Policy Watch

• Federal Reserve adopts more cautious stance on 2025 monetary policy
  

• DOJ Antitrust chief Jonathan Kanter announces Friday departure
  

• Housing starts decline 1.8% while building permits rise 6.1% in November
  

• SpaceX faces federal reviews over security reporting violations
  

What to Watch

1. Fed Policy Implementation:

• Monitor market reaction to reduced rate cut projections

• Watch for changes in January rate cut probability

• Track Treasury yield movements

2. Tech Sector Dynamics:

• $NVDA competition from $GOOGL's TPU advancement

• AI chip supply dynamics following $MSFT's aggressive purchasing

• Custom ASIC vs GPU market share developments

3. Housing Market Indicators:

• Impact of rising mortgage rates on housing demand

• Builder sentiment following mixed November data

• Regional market variations in construction activity

Thanks for reading 🙂

- John