Topline
Major stock indexes dipped again Wednesday ahead of a looming afternoon report from the Federal Reserve which may reveal important information about the central bank’s closely watched attitude toward interest rate cuts.
Key Facts
Coming off of a two-month-worst 1.6% loss, the tech-heavy Nasdaq dipped a further 0.9% by midday Wednesday, extending its 2024 decline to nearly 3%.
The Dow Jones Industrial Average and S&P 500 fell 0.6% apiece Wednesday, though the less tech-concentrated indexes’ losses this week have been far less severe than the Nasdaq’s.
The latest stock slump comes ahead of the 2 p.m. release of minutes from the Fed’s December meeting.
The report is likely to give the market further breadcrumbs on how starkly the Fed plans to make growth-friendly cuts to rates, potentially bolstering or dousing the rate-cutting narrative which drove significant stock market gains at the conclusion of 2023.
Key Background
The Fed minutes will shed further light on the central bank’s thinking during the December conclave of its policy-setting Open Markets Committee. That meeting featured the third-consecutive time the Fed voted to keep rates the same, but notably shared future projections from Fed staff which indicated a consensus of several rate cuts in 2024, coinciding with tangible progress in inflation (price increases initially spurred rate hikes). Lower rates typically boost stock prices, as lower borrowing costs bump corporate profits.
Contra
Though the headline losses this week, especially for tech stocks, look brutal, analysts suggest angst surrounding 2024’s early losses may be overblown. Craig Erlam, senior market analyst at Oanda, chalked up the early losses to “profit-taking” after last year’s “remarkable” finish, while Sevens Report founder Tom Essaye concurred much of the tumble came due to “natural rebalancing” from fund managers at the start of the calendar year, funneling money away from the 2023 darling tech sector toward more equally weighted portfolios.
Surprising Fact
Again slumping Wednesday were the seven most valuable tech stocks, as the group including Apple and Tesla lost a combined $47 billion in market capitalization. The group has lost a total of $285 billion of market value through the first two trading sessions of the year.
