Update Equities: Investor mood sours
In reaction to the US Federal Reserve policymaker meeting on Wednesday, US stocks and their global counterparts corrected from recent highs. Overall, the outlook for US rate cuts in 2025 appeared more conservative than had been expected.
This led to the biggest decline in US stocks since early August. The hit was strongest for stocks scoring high on momentum and growth factors, and was notably less pronounced for stocks generally known to be less sensitive to market volatility.
Within the last five days and after some sideways movement at the beginning of the week, global equity markets dropped by several percentage points, especially in the US. Among the constituents of the MSCI World Index, the energy sector was hit the hardest, followed by the materials and utilities sectors. Health care and consumer staples companies, known to be more defensive, fared relatively well, but nevertheless had losses as investors pulled out of stocks after the Fed meeting.
Another incident denting investor sentiment were the earnings results from the US semiconductor company Micron, that lost around 15% in after-market trading. Micron’s outlook for the first half of next year clearly missed analyst expectations, based on weaker smartphone, computer and automotive demand. The news also dragged down European chip makers, that may face similar challenges in the coming months. This decline came after a few days of excitement around semiconductor names, triggered by Broadcom’s earnings report. Its share price rose by close to 40% in the two days following its earnings announcement, fuelled by current and expected artificial-intelligence related revenues.
Jennifer Paffen
