Wall Street balances technological optimism with monetary caution following the Fed's decision
The US market closed Thursday on a mixed note, with major indexes remaining nearly unchanged despite the Federal Reserve's rate cut. While tech stocks and AI-related industrials soared, buoyed by strong earnings and massive investment prospects, other sectors faltered, especially following the Fiserv debacle. The market is digesting a mixed message from Jerome Powell, who dampened expectations by stating that another rate cut in December was by no means certain.
The Fed cuts but tempers future expectations
On Wednesday, the Federal Reserve implemented another 25-basis-point cut to its benchmark rates, bringing the target range to 3.75%-4%, thus confirming market expectations. This decision comes amid persistent inflation and growing concerns about employment. However, Jerome Powell dashed investors' hopes by stressing that the path to another rate reduction in December is far from clear. A further cut in December is not a given, noted the Fed Chair, highlighting that the committee holds strongly divergent views on how to proceed. This caution reflects the institution's delicate position: maintaining employment while curbing inflation that remains above targets in several areas. The vote was not unanimous, with one central bank official advocating for a larger 50-basis-point cut and another recommending that rates remain unchanged. The Fed also announced that starting December 1, it will halt its gradual balance sheet reduction (quantitative tightening), redirecting its securities investments toward Treasury bonds to ensure sufficient liquidity in the money markets. This announcement aimed at preventing another banking liquidity crisis.
Semiconductors and Industry Booming Due to AI and Capex Outlook
The semiconductor sector experienced an extraordinary day, with several stocks posting double-digit gains. Teradyne, the test equipment manufacturer, soared by 20.47% thanks to better-than-expected results driven by strong demand for testing solutions applied to artificial intelligence chips. The fourth quarter is expected to mark an acceleration, with a 25% sequential growth anticipated according to management forecasts. Seagate Technology surged 19.11%, affirming investor confidence in the future demand for high-capacity storage for data centers. Western Digital rose 13.18%, benefiting from the momentum in the storage sector. These movements are part of a broader context of massive announcements regarding capital expenditures (capex) by tech giants. Microsoft, Alphabet, and Meta have all increased their infrastructure spending forecasts for 2025 and stated that investments in 2026 would be even greater. Google now anticipates between $91 and $93 billion, Microsoft states that its cloud capacity demand regularly exceeds supply, while Meta is directing between $70 and $72 billion exclusively towards AI infrastructure. These figures, surpassing sovereign state budgets, fuel optimism about the reality of the AI revolution and its potential to generate returns. Caterpillar, the heavy equipment giant, climbed 11.63%, benefiting from increased demand for construction and mining equipment to support this technological race. Centene Corporation jumped 12.50%, Cummins rose 6.51%, while companies specializing in energy and electricity also recorded significant gains.
Sector Debacle: Fiserv Plummets 44%, Dragging Down the Fintech Sector
While the technology and industrial sectors thrived, other areas experienced dramatic downturns. Fiserv, the American payments and banking technology giant, plummeted by 44.04%, marking its worst performance as a publicly traded company, after shocking the market with a drastic cut in its outlook. The company lowered its annual organic growth forecast from 10% to just 3.5%-4.5%, acknowledging that previous expectations were objectively difficult to achieve. Expected earnings for the year declined from $10.15-$10.30 per share to $8.50-$8.60, a reduction of nearly one-third. The new CEO, Mike Lyons, attributed this debacle to an overestimation of growth prospects in Argentina, a lack of investment in key products, and ineffective priority management. This catastrophe affected its peers: Global Payments fell by 7.50%, Fidelity National Information Services by 6.72%, and Corpay by 6.12%. In the broader software technology sector, Adobe retreated by 6.13%, while Enphase Energy, the leader in residential solar, plunged by 15.15% after issuing a fourth-quarter warning, confirming weak European demand despite an American resurgence. Caesars Entertainment dropped by 15.21%, reflecting broader nervousness about discretionary sectors in the face of macroeconomic and commercial uncertainties. These contrasting movements highlight a growing market dichotomy, where beneficiaries of massive AI investment thrive, while traditional and cyclical sectors suffer from uncertain demand and downgraded business prospects.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
