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Stocks Hit by Tech Rout on Eve of Fed Decision Day: Markets Wrap

(Bloomberg) — Heavy selling resumed in Wall Street’s largest technology companies, with American shares snapping a two-day rebound amid signs investors are paring exposure in US risk assets. European stocks gained.

One day before a Federal Reserve decision that will be parsed for an assessment on how President Donald Trump’s trade policies are affecting the economy, US equities slid, with megacaps hitting the lowest since September. Nvidia Corp. sank 3.4% despite laying out plans to expand its AI reign with robots and desktop systems. Data showing hot import prices didn’t help market sentiment either. Treasuries edged up after a solid $13 billion sale of 20-year bonds. Gold climbed to a fresh record.

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Investors have slashed holdings of US equities by the most on record while cash levels jumped, according to Bank of America Corp.’s latest survey. Just about a month ago, stocks were making new highs on expectations that Trump administration policies would stoke growth. Those assumptions may now be under threat if the economy slows and big bets on artificial intelligence don’t pay off. 

“Because investors’ favorite stocks have suffered so much, it’s likely impacting investor sentiment disproportionately,” said Bret Kenwell at eToro. “Historically, similar levels in sentiment have coincided with at least a short-term bottom in US stocks, although it’s not clear that we’ve seen a capitulatory type move that generally marks the bottom.”

Following a rapid stock selloff, talks about a “Fed put” to rescue investors have risen. But anyone expecting some reassurance at the March meeting will be disappointed, according to Anna Wong at Bloomberg Economics.

“Sticky inflation and higher inflation expectations raise the bar for Fed cuts,” said Lauren Goodwin at New York Life Investments. “The Fed is likely to need to see a stronger deterioration in financial conditions and the economic growth outlook before pre-emptively cutting with inflation figures so strong.” 

Using 2018’s insurance cuts as a guideline, Goodwin said an equity market valuation decline of at least 20% would be required to push the Fed to act.

The S&P 500 fell 1.1%. The Nasdaq 100 slid 1.7%. The Dow Jones Industrial Average lost 0.6%. Tesla Inc. sank 5.3%. Meta Platforms Inc. became the last of the Magnificent Seven stocks to lose its year-to-date gain. Alphabet Inc. agreed to acquire cybersecurity firm Wiz Inc. for $32 billion in cash. 

The yield on 10-year Treasuries dropped one basis point to 4.29%. The dollar fluctuated.

US PREVIEW: FOMC, Powell to Signal Don’t Count on ‘Fed Put’

With Fed officials expected to hold rates steady on Wednesday, the market will focus on their updated economic projections and Chair Jerome Powell’s press conference for clues about the path ahead. 

For now, policymakers have signaled they’re in a wait-and-see mode as they seek further progress on inflation and greater clarity on the economic impact of Trump’s policies.

“The Fed likely holds tight here,” said Scott Helfstein at Global X. “Fed Chair Powell has repeatedly said that the risks to price stability and full employment are balanced. That is likely still true, but risks to both are rising. This is not time to sell and go away, but perhaps time to review long-term strategy against near-term volatility.”

Options traders are pricing in a 1.2% move in the S&P 500 in either direction on Wednesday — up from an average of 0.8% for Fed Days over the past year, according to data from Stuart Kaiser, Citigroup’s head of US equity trading strategy.

A survey conducted by 22V Research shows investors are watching the Fed more closely than the prior three meetings. 

But there’s no real consensus on the market reaction — with 34% of respondents saying “risk-off”, 27% “risk-on” and 39% “mixed/negligible.”

The tally also revealed there’s no consensus on whether Powell will express concern over the recent moves higher in consumer inflation expectations.

“Our survey respondents think the current tariff environment will still lead to 50 basis points of cuts in 2025, but the skew has shifted to more cuts,” said Dennis DeBusschere, founder of 22V. “The last time we asked was pre-tariff announcements and equity drawdowns.”

“Time will tell if the decision and meeting offer relief from the pain for the S&P 500,” according to Bespoke Investment Group strategists. “If there is one silver lining though, historically, Fed days when rates have been left unchanged have tended to see solid gains.”

Bespoke also analyzed the average intraday path of the S&P 500 on Fed days based on whether or not the S&P 500 has been in the midst of correction. 

“Whereas the S&P 500 has tended to rally throughout the session on Fed days when the market is rallying, the moves have been more volatile when when the S&P 500 is in a correction,” the strategists said.

For times when rates were left unchanged and the S&P 500 was in the middle of a correction, the index has tended to fall after the rate decision, but by the close it has averaged a slightly larger gain than the norm for all Fed days.

As the S&P 500 slid into a correction last week, Bank of America Corp. clients bought US equities — with the sectors they favored indicating they weren’t betting on an economic contraction.

There were “bigger inflows into cyclical than defensive sectors in aggregate, suggesting that clients weren’t positioning for recession,” quantitative strategist Jill Carey Hall wrote in a research note.

Even after the 10% correction in US large caps, earnings expectations embedded in stock prices are extremely high — at levels achieved only four times since the tech bubble 25 years ago — and may remain a challenge to equities, according to Gina Martin Adams and Michael Casper at Bloomberg Intelligence.

“Consensus has taken down estimates for the first half but is still holding onto forecasts for a robust second-half recovery that doesn’t appear likely without a major near-term change at the Federal Reserve or with taxes,” they said.

Key events this week:

  • Bank of Japan rate decision, Wednesday
  • Federal Reserve rate decision, Wednesday
  • China loan prime rates, Thursday
  • Bank of England rate decision, Thursday
  • US Philadelphia Fed factory index, jobless claims, existing home sales, Thursday
  • Eurozone consumer confidence, Friday
  • Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 1.1% as of 4 p.m. New York time
  • The Nasdaq 100 fell 1.7%
  • The Dow Jones Industrial Average fell 0.6%
  • The MSCI World Index fell 0.6%
  • Bloomberg Magnificent 7 Total Return Index fell 2.5%
  • The Russell 2000 Index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.2% to $1.0946
  • The British pound rose 0.1% to $1.3006
  • The Japanese yen was little changed at 149.30 per dollar

Cryptocurrencies

  • Bitcoin fell 2% to $82,293.57
  • Ether fell 1.6% to $1,904.2

Bonds

  • The yield on 10-year Treasuries declined one basis point to 4.29%
  • Germany’s 10-year yield was little changed at 2.81%
  • Britain’s 10-year yield was little changed at 4.64%

Commodities

  • West Texas Intermediate crude fell 1% to $66.92 a barrel
  • Spot gold rose 1.2% to $3,035.76 an ounce

–With assistance from Sujata Rao, Allegra Catelli, John Viljoen and Aya Wagatsuma.

©2025 Bloomberg L.P.

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