(Dec 18): A renewed slide in big tech weighed on stocks while bonds moved away from session lows as Federal Reserve governor Christopher Waller signalled support for rate cuts ahead of US inflation data.
Despite the bounce in Treasuries, equities came under pressure as Nvidia Corp and Alphabet Inc led megacaps lower. Losses accelerated as the S&P 500 broke below a key technical level. The Nasdaq 100 lost 1.2%. Micron Technology Inc will report earnings after the close amid scepticism about the artificial intelligence (AI) trade.
With the consumer price index running the risk of being less reliable than usual due to government-shutdown disruptions, Waller’s remarks were closely watched for fresh Fed insights. While investors saw his comments as more dovish, the official also warned there’s no need to rush amid elevated inflation.
The November CPI report on Thursday will offer only a partial snapshot of inflation, without monthly changes for most of the price categories. Much of the October price information was unable to be collected and November data gathering was also delayed by the government closure.
That explains the relative sense of apathy regarding the data, with options traders betting the S&P 500 will swing 0.7% in either direction, according to data compiled by Barclays plc. That’s sharply lower than the 1% average realised move spurred by the 12 reports delivered through September.
See also: Tech stocks, Oracle lead S&P 500 higher amid mass options expiry
Earlier this week, the high-profile jobs report also drew limited reaction. The data was impacted by the federal shutdown and proved to be a noisy reading showing the labour market is slowing, but not collapsing.
“The muted response to the employment data is likely to be repeated — after all, the data quality concerns with payrolls are also applicable to CPI,” said Ian Lyngen at BMO Capital Markets. “At least insofar as there will be a reasonable amount of skepticism regardless of how the data ultimately comes in.”
See also: US stocks stage comeback as CPI fuels Treasury gains
Outlining a scenario where inflation continues to slow through 2026, Waller said in a CNBC forum that monetary policy settings are up to 100 basis points above neutral — the level where the Fed is neither restraining growth nor stoking price pressures.
Waller, who is under consideration to be the next Fed chair, is expected to meet for an interview with President Donald Trump later on Wednesday.
Waller’s shot for the Fed chair job improved this week, alongside that of Kevin Warsh, as doubts emerged over frontrunner Kevin Hassett, according to Elias Haddad at Brown Brothers Harriman & Co.
“From a market perspective, Waller is the top pick, as he is a known quantity inside and outside the Fed, he has credibility and knows how to build consensus,” said Chris Low at FHN Financial.
The Fed lowered rates for a third straight meeting last week to support what chair Jerome Powell called a “gradually cooling” labour market with “significant” risks of a further slowdown.
However, Fed officials are split over whether more cuts are needed next year. The median Fed official penciled in just one reduction in 2026, according to rate projections released alongside the decision, but some policymakers see no further cuts. Traders, meanwhile, have been counting on two.
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