[New York Stock Market] Nasdaq Hits Another Record High... Tech Stocks Surge Ahead of FOMC

Alphabet up 3.54%, Tesla up 6.14%
Broadcom surges 11.21%, market cap surpasses $1 trillion
0.25% rate cut expected at FOMC on 18th
November retail sales, PCE, and Q3 GDP also released

On the 16th (local time) in the U.S. New York stock market, the Nasdaq index once again reached an all-time high. Investors expanded their bets, confident of a 0.25 percentage point rate cut at this week's scheduled Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve (Fed). Apple, Alphabet (Google's parent company), Tesla, and others all recorded new highs.

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed down 110.58 points (0.25%) at 43,717.48 from the previous trading day. The large-cap-focused S&P 500 index closed up 22.99 points (0.38%) at 6,074.08, and the tech-heavy Nasdaq index rose 247.17 points (1.24%) to close at an all-time high of 21,738.9.

By stock, major tech stocks all surged. Apple rose 1.17%, while Alphabet and Tesla soared 3.54% and 6.14%, respectively. Semiconductor company Broadcom, which surpassed a $1 trillion market capitalization last week, jumped 11.21%. On the other hand, AI leader Nvidia fell 1.68%. Ford Motors dropped 3.85% after U.S. Jefferies downgraded its investment rating from 'Hold' to 'Underperform' due to concerns over excess inventory.

The expectation that the Fed will implement a 'small cut' (0.25 percentage point rate cut) this week pushed the stock market higher, especially among tech stocks. The market is highly anticipating that the Fed will cut rates by 0.25 percentage points at the FOMC regular meeting held on the 17th and 18th. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected a 95.4% probability that the Fed will cut rates by 0.25 percentage points at this month's FOMC. The probability of a rate hold is 4.6%.

The key is the dot plot showing Fed officials' rate projections and the Summary of Economic Projections (SEP), which includes forecasts for growth, inflation, and unemployment. As the U.S. economy remains strong and concerns about 'Trumflation' (inflation caused by Trump's policies) grow, some on Wall Street predict that the Fed may reduce its 2025 rate cut forecasts from the previous four times (100 basis points; 1 bp = 0.01 percentage points) to two or three times. Even if the Fed cuts rates this month, there is growing weight behind the view that it will be a 'hawkish cut'?a cut made before slowing the pace of monetary easing next year.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, analyzed, "After the first rate cut in September, unemployment stabilized but inflation rose somewhat. While all FOMC decisions and press conferences are widely covered, the last decision and press conference of 2024 could be the most interesting."

Meanwhile, the market recently shows signs that the broad-based rise seen during the 'Trump rally' following Donald Trump's presidential election victory has calmed, and a narrow rally focused on some tech stocks is unfolding. Joe Mazzola, Trading and Derivatives Strategist at Charles Schwab, said, "The breadth of the market we are seeing has started to narrow somewhat, and rallies are becoming more concentrated in a few stocks. We don't know how long the upward trend will last, but it is likely to continue at least until the end of the year."

This week, key indicators that can confirm the U.S. economic situation will be released one after another. On the 17th, the November retail sales data, which supports two-thirds of the U.S. economy, will be announced, and on the 19th, the final GDP growth rate for the third quarter will be released. On the 20th, the November Personal Consumption Expenditures (PCE) price index, the inflation gauge most closely watched by the Fed, will be published.

Government bond yields remain steady. The 10-year U.S. Treasury yield, a global bond yield benchmark, is steady at 4.4%, the same as the previous trading day, while the 2-year U.S. Treasury yield, sensitive to monetary policy, rose 1 basis point to 4.25% from the previous day.