Dear traders, dear stock market friends.
While the Dow Jones reached a new all-time high last week, the Nasdaq 100 came under pressure and ended the week down 1.9 %. After many investors initially bet on a tailwind for equities following the Fed meeting, sentiment in the tech sector changed noticeably.
Fed interest rate decision and signal effect for the market
As expected by the majority of the futures markets, the Fed cut the key interest rate by a further 25 basis points last Wednesday to a range of 3.50 % - 3.75 %. This was the third rate cut in a row (following the rate cuts in September and October). More important than the cut itself was the communication:
- Risk balance shifts: The Fed emphasized that downside risks on the labor market have recently increased.
- At the same time, inflation remains „somewhat elevated“. So not „mission accomplished“.
- The structure of the forward guidance was clearly geared towards the „extent and timing“ of further steps, i.e. no automatic mechanism for rapid further interest rate cuts.
- There were 3 votes against: One was for a cut of 50 basis points, two for no cut at all; a signal that the Fed is clearly divided internally.
Liquidity & reserve management purchases„
Away from the big headlines on the key interest rate, the Fed announced a technical but hugely important piece of news for the market structure: the declaration that although bank reserves are currently regarded as „ample“, proactive measures are being taken to secure this state in the long term and prevent volatility on the money market.
Specifically, the central bank announced that it would resume purchases of short-dated US government bonds (Treasury Bills). The program started on Friday, 12.12.2025, with an initial volume of around USD 40 billion per month.
- Technology instead of stimulus (no QE): The Fed attaches great importance to ensuring that this is not misunderstood as „quantitative easing“ (QE) to stimulate the economy. It is purely technical „reserve management“.
- Avoid the trauma of 2019: The aim is to safeguard the market function. The Fed wants to avoid stress on the repo market torpedoing interest rate management at all costs; a scenario that brings back painful memories of the repo crisis in September 2019.
Relative weakness in the Nasdaq 100
While the Dow Jones and the Russell 2000 made new highs last week, the Nasdaq 100 ended the week in the red. This divergence can be attributed to three core factors:
1) Disappointing earnings from tech heavyweights
In a week in which the macro environment was generally supportive, the negative factors in the tech sector were mainly attributable to specific micro factors. The focus was particularly on the quarterly figures from Oracle and Broadcom; two stocks that the market now regards as a kind of „thermometer“ for AI infrastructure spending (cloud, data centers, networking, custom chips).
Although both companies exceeded expectations in terms of earnings per share (EPS), the shares still came under pressure because the stock market is looking for confirmation of the next stage of growth in AI demand rather than rewarding the „bottom line beat“ at this stage.
At Oracle, it was primarily the quality of sales and growth that caused skepticism: the market had not only expected solid figures, but also clear signals that the AI-driven cloud momentum would accelerate even further. As these signals failed to materialize, a classic “sell on good news” set in after the earnings.
At Broadcom, the reactions were similar, but with a slightly different focus: Broadcom is also seen as an important beneficiary of the AI boom (network/connectivity, data center components and especially the custom silicon/accelerator ecosystem). However, the Broadcom share is already at a valuation level that is only justified if the AI trend translates smoothly into high growth rates plus stable or even rising margins. An EPS beat alone is not enough in such a phase if investors fear that AI sales will increase but margins will be worse than hoped, or competition and price pressure will increase.
2) Growth vs. valuation
At the end of 2025, many fund managers are asking themselves: how much growth is already priced in? Many mega-caps were trading on historically high multiples at the beginning of the week. The Fed's decision was a kind of catalyst to take risk out of these crowded trades and shift it to more favorable market segments.
3) Rotation favors "old economy"
With the Fed's rate cut and its signal that further steps will depend more on the upcoming data, the market positioned itself for a scenario without a hard recession (rather “soft landing” to “no landing”). The Fed projections also point to continued decent growth in 2026 (including a higher 2026 growth outlook). In such an environment, industrial, financial and transportation stocks typically perform better than highly valued growth stocks, which are more dependent on falling yields and „perfect“ growth stories.
Technical outlook for the Nasdaq 100
As long as the relative weakness in the Nasdaq 100 is only a short-term correction, there is not too much cause for concern for the time being. The following daily chart shows that the Nasdaq 100 Index is well supported in the short term at around 25,000 points in the area of the EMA 50 (green). Even if the correction were to continue, the long-term upward trend would not be in danger as long as the support zone around the 24,000-point mark is not breached.
In the medium to long term, however, relative weakness in the Nasdaq 100 would probably be a serious warning signal for the broad bull market. The following ratio chart shows the QQQ (Nasdaq 100 ETF) divided by the SPY (S&P 500 ETF). The correction (= relative weakness of the Nasdaq 100) that has been ongoing since the beginning of November can be clearly seen here.
The decisive factor for the further course of the market is now whether the marked support can be defended. A breakout above the last local high on the upside, on the other hand, would signal a renewed outperformance of the Nasdaq 100, which would also correlate with an upward trend in the broad market.
Author: Tobias Schmid
Date: 15.12.2025
