The S&P 500 Index has faced downward pressure as Federal Reserve Chair Jerome Powell's comments on trade risks and economic projections weigh on investor sentiment. Despite the Fed's anticipated rate cut, which typically aims to stimulate economic activity, the market's reaction has been cautious. TradeStation strategist David Russell noted, "Good-bye punch bowl. No Christmas cheer from the Fed," highlighting the market's tepid response to the Fed's latest moves. Small-cap stocks, which are more sensitive to interest rates due to their higher leverage, have been particularly affected, dropping 2.6%. Additionally, the recent surge led by Tesla and the Magnificent Seven appears to be undergoing a natural pullback.
While the Fed's decision to cut rates might suggest concerns about economic growth, the broader economic indicators remain robust. The US economy is performing "very well," with a lower-than-expected jobless rate, which is reassuring for risk assets. However, Powell's acknowledgment of potential policy changes from the Trump administration, including tariffs, introduces uncertainty. These trade policy concerns could lead to increased volatility as firms navigate potential cost increases and competitive pressures on the international stage.
As of 15:40 on December 18, the S&P 500 is trading at 5,892.56, down from its last close of 6,050.61. The index opened at 6,047.65, reaching an intraday high of 6,070.67 before dipping below the 6,000 mark. Investors remain watchful of the Fed's next projections and the evolving trade policy landscape.