Stock markets reel under the weight of soaring bond yields and hawkish Fed commentary, with fintech stocks taking a beating.
The Dow took a nosedive on Wednesday, shedding 1,123 points in its worst session of the month. The culprit? A Federal Reserve announcement that hit Wall Street like a cold bucket of water. While the Fed opted to keep rates unchanged for December, Chairman Jerome Powell’s comments about a “higher for longer” rate environment sent shivers down traders’ spines.
US rate futures price in Fed on hold in January, less than two cuts in 2025 https://t.co/QIEXdfTI8u pic.twitter.com/wa8CPhVUlf
— Reuters Politics (@ReutersPolitics) December 19, 2024
Bond yields soared in response, with the 10-year Treasury note climbing to levels not seen in over a decade. The ripple effect? Stocks tanked across the board, leaving investors scrambling for cover. The S&P 500 and Nasdaq didn’t fare much better, dropping almost 3% and 3.5%, respectively. The market’s message was clear: hawkish Fed rhetoric isn’t just sobering—it’s downright brutal.
Bond Yields Skyrocket, Dow Sinks
The Fed’s announcement wasn’t just a blow to equities ; it was a boon for bond yields. Rising bond yields are kryptonite for the stock market, especially for the Dow, whose members often include dividend-paying stalwarts. When yields rise, these stocks look less attractive compared to fixed-income securities.
The 10-year Treasury yield spiked to 4.49%, up 10 basis points, triggering alarm bells. Bond traders seemed to be betting that the Fed’s aggressive stance could choke economic growth, but Powell appeared unbothered. The central bank remains laser-focused on inflation, which, though cooling, isn’t yet at the Fed’s 2% target.
WATCH: The US Federal Reserve cut rates but signaled a slower pace ahead, citing solid economic growth, low unemployment, and elevated inflation. Just two rate cuts are projected by the end of 2025 https://t.co/DBLlkjyMs6 pic.twitter.com/bK0srFIVbz
— Reuters Business (@ReutersBiz) December 18, 2024
For context, rising bond yields also make it costlier for businesses to borrow and grow, further dampening investor sentiment. The Dow’s dip wasn’t just a knee-jerk reaction—it was a calculated retreat in the face of mounting uncertainty.
Tech and Growth Stocks: Casualties of the Rate Hike Fallout
Growth-oriented sectors, particularly tech, and fintech, bore the brunt of Wednesday’s market carnage. Companies reliant on borrowing to fund expansion felt the heat, with investors pulling the plug on riskier bets. The Nasdaq, home to tech darlings like Tesla and Meta, suffered its own share of losses, but the pain wasn’t confined to Silicon Valley. From healthcare to industrials, few sectors emerged unscathed.
For the Dow in particular, UnitedHealth Group’s stock has tumbled 15%, dragging everything down with it. The slide kicked off following the shooting of UnitedHealthcare CEO Brian Thompson—a grim turn of events for the insurance giant. In a twist of market irony, UnitedHealth managed a midweek rebound, closing Wednesday up 3.3%.
The Dow tumbled more than 1,100 points and marked its longest losing streak since 1974 https://t.co/wUCMB4NNMN
— CNN (@CNN) December 18, 2024
Nvidia, the US chipmaker that joined the Dow just last November, isn’t immune to turbulence. Despite a jaw-dropping 180% surge in 2024, the company’s stock has stumbled over the past month, slipping 5% and adding to the Dow’s overall malaise. For a heavyweight like Nvidia, even small moves make a big dent in the index.
Meanwhile, market strategists are busy recalibrating their forecasts. While some argue that a recession might be unavoidable if rates stay elevated, others point to resilient consumer spending as a potential cushion. Either way, volatility is the name of the game for the foreseeable future.
Fintech’s Pain: Robinhood, Affirm, SoFi, Upstart Among the Worst Hit
The Fed’s announcement also hit fintech stocks particularly hard. Heavyweights like SoFi and Upstart saw double-digit losses as investors shied away from high-growth, high-risk plays. Robinhood Markets Inc. was down 8.2%, Affirm Holdings Inc. fell 7.6%. Upstart Holdings Inc. shares slumped by 7.1% and SoFi Technologies Inc. shares dipped 5.9%.
Why the sharp selloff? Fintech firms are especially vulnerable to rising rates. Higher borrowing costs can choke the very consumer activity these companies depend on, whether it’s personal loans, mortgages, or credit card spending. Combine that with Powell’s hawkish tone, and you’ve got a perfect storm for the sector.
Fintech isn’t alone in feeling the pressure. The broader tech sector has seen a steady erosion of investor confidence since the Fed began its rate-hiking campaign in early 2022. But for fintech, which is often considered the poster child of growth over profits, the fallout is particularly acute.
What’s Next for the Dow and Fintech?
While the Dow’s latest plunge is alarming, some analysts see a silver lining. A significant market correction could pave the way for a healthier, more sustainable rally in 2024. But for now, volatility rules, and sectors like fintech may remain in the crosshairs as investors continue to digest the Fed’s rate trajectory.
As the dust settles, one thing is clear: Powell’s Fed isn’t here to make friends, and the markets had better get used to it.
For more stories of finance and tech, browse our fintech archives.
Stock markets reel under the weight of soaring bond yields and hawkish Fed commentary, with fintech stocks taking a beating.
The Dow took a nosedive on Wednesday, shedding 1,123 points in its worst session of the month. The culprit? A Federal Reserve announcement that hit Wall Street like a cold bucket of water. While the Fed opted to keep rates unchanged for December, Chairman Jerome Powell’s comments about a “higher for longer” rate environment sent shivers down traders’ spines.
US rate futures price in Fed on hold in January, less than two cuts in 2025 https://t.co/QIEXdfTI8u pic.twitter.com/wa8CPhVUlf
— Reuters Politics (@ReutersPolitics) December 19, 2024
Bond yields soared in response, with the 10-year Treasury note climbing to levels not seen in over a decade. The ripple effect? Stocks tanked across the board, leaving investors scrambling for cover. The S&P 500 and Nasdaq didn’t fare much better, dropping almost 3% and 3.5%, respectively. The market’s message was clear: hawkish Fed rhetoric isn’t just sobering—it’s downright brutal.
Bond Yields Skyrocket, Dow Sinks
The Fed’s announcement wasn’t just a blow to equities ; it was a boon for bond yields. Rising bond yields are kryptonite for the stock market, especially for the Dow, whose members often include dividend-paying stalwarts. When yields rise, these stocks look less attractive compared to fixed-income securities.
The 10-year Treasury yield spiked to 4.49%, up 10 basis points, triggering alarm bells. Bond traders seemed to be betting that the Fed’s aggressive stance could choke economic growth, but Powell appeared unbothered. The central bank remains laser-focused on inflation, which, though cooling, isn’t yet at the Fed’s 2% target.
WATCH: The US Federal Reserve cut rates but signaled a slower pace ahead, citing solid economic growth, low unemployment, and elevated inflation. Just two rate cuts are projected by the end of 2025 https://t.co/DBLlkjyMs6 pic.twitter.com/bK0srFIVbz
— Reuters Business (@ReutersBiz) December 18, 2024
For context, rising bond yields also make it costlier for businesses to borrow and grow, further dampening investor sentiment. The Dow’s dip wasn’t just a knee-jerk reaction—it was a calculated retreat in the face of mounting uncertainty.
Tech and Growth Stocks: Casualties of the Rate Hike Fallout
Growth-oriented sectors, particularly tech, and fintech, bore the brunt of Wednesday’s market carnage. Companies reliant on borrowing to fund expansion felt the heat, with investors pulling the plug on riskier bets. The Nasdaq, home to tech darlings like Tesla and Meta, suffered its own share of losses, but the pain wasn’t confined to Silicon Valley. From healthcare to industrials, few sectors emerged unscathed.
For the Dow in particular, UnitedHealth Group’s stock has tumbled 15%, dragging everything down with it. The slide kicked off following the shooting of UnitedHealthcare CEO Brian Thompson—a grim turn of events for the insurance giant. In a twist of market irony, UnitedHealth managed a midweek rebound, closing Wednesday up 3.3%.
The Dow tumbled more than 1,100 points and marked its longest losing streak since 1974 https://t.co/wUCMB4NNMN
— CNN (@CNN) December 18, 2024
Nvidia, the US chipmaker that joined the Dow just last November, isn’t immune to turbulence. Despite a jaw-dropping 180% surge in 2024, the company’s stock has stumbled over the past month, slipping 5% and adding to the Dow’s overall malaise. For a heavyweight like Nvidia, even small moves make a big dent in the index.
Meanwhile, market strategists are busy recalibrating their forecasts. While some argue that a recession might be unavoidable if rates stay elevated, others point to resilient consumer spending as a potential cushion. Either way, volatility is the name of the game for the foreseeable future.
Fintech’s Pain: Robinhood, Affirm, SoFi, Upstart Among the Worst Hit
The Fed’s announcement also hit fintech stocks particularly hard. Heavyweights like SoFi and Upstart saw double-digit losses as investors shied away from high-growth, high-risk plays. Robinhood Markets Inc. was down 8.2%, Affirm Holdings Inc. fell 7.6%. Upstart Holdings Inc. shares slumped by 7.1% and SoFi Technologies Inc. shares dipped 5.9%.
Why the sharp selloff? Fintech firms are especially vulnerable to rising rates. Higher borrowing costs can choke the very consumer activity these companies depend on, whether it’s personal loans, mortgages, or credit card spending. Combine that with Powell’s hawkish tone, and you’ve got a perfect storm for the sector.
Fintech isn’t alone in feeling the pressure. The broader tech sector has seen a steady erosion of investor confidence since the Fed began its rate-hiking campaign in early 2022. But for fintech, which is often considered the poster child of growth over profits, the fallout is particularly acute.
What’s Next for the Dow and Fintech?
While the Dow’s latest plunge is alarming, some analysts see a silver lining. A significant market correction could pave the way for a healthier, more sustainable rally in 2024. But for now, volatility rules, and sectors like fintech may remain in the crosshairs as investors continue to digest the Fed’s rate trajectory.
As the dust settles, one thing is clear: Powell’s Fed isn’t here to make friends, and the markets had better get used to it.
For more stories of finance and tech, browse our fintech archives.
