S&P 500 and Nasdaq face challenges following disappointing Oracle results

Yesterday, stock indices closed higher. The S&P 500 rose by 0.67%, while the Nasdaq 100 strengthened by 0.33%, and the Dow Jones jumped by 1.05%. However, the rally in the stock market, driven by the Fed's interest rate cuts, has waned as disappointing results from Oracle pressured tech stocks.

Oracle's earnings report raised concerns about the overall resilience of the technology sector, which has been the primary driver of market growth in recent months. The decline in Oracle's shares triggered a chain reaction affecting other major tech companies such as Microsoft, Apple, and Amazon. Investors fear that current interest rates, while potentially set to decrease in the future, are already negatively impacting corporate earnings. Follow the link for more details.

Fed concludes December meeting with another 25 bp rate cut

The Federal Reserve wrapped up its December meeting with another rate cut—this time by an additional 25 basis points. Its target range now stands at 3.50% to 3.75%. This marks the third easing of the year following the measures taken in September and October, a scenario that the market had anticipated. In essence, rates have returned to their lowest levels since 2022. However, the superficial smoothness of this decision masks a significant divide within the regulatory body.

For the first time since 2019, three Fed representatives opposed the final decision: out of the 12 voting members, three voted against it. The economy is slowing, the labor market has cooled, and inflation remains approximately one point above the 2% target. During the press conference, Jerome Powell described the situation as "complex" and emphasized that the committee unanimously acknowledges heightened price risks and signs of a weakening labor market. Follow the link for more details.

Stock market responses positively to Fed rate cut

The US stock market benefited from a triple advantage provided by the Fed. In addition to raising its GDP forecast for 2026 from 1.8% to 2.3% and lowering inflation estimates from 3% to 2.6%, the central bank did not rule out further monetary easing. Jerome Powell spoke about productivity growth driven by AI technologies. According to the Fed chair, the impact of job declines due to AI is not yet being fully felt.

In the latest FOMC forecasts, there is one act of monetary expansion projected for 2026, while the futures market is counting on two. Everything will depend on the data regarding the American economy. However, the lack of a safety cushion in terms of expectations for further decreases in the federal funds rate may make the S&P 500 vulnerable to sell-offs in technology stocks. Follow the link for more details.