Global markets fracture after Fed forecasts fewer rate cuts 2025. Nvidia bounces on unveiling world’s smallest, cheapest AI supercomputer

Already overnight, US stocks suffered their biggest drop since early August. The Nasdaq $NASDAQ 100 Index (.NDX.US)$ lost 3.6%, the S&P 500 $S&P 500 Index (.SPX.US)$ almost 3%. It’s clear markets are reacting negatively—they didn’t get the early Christmas present they hoped for. Yes, the US Federal Reserve cut rates by a quarter point, its third rate cut this year. But its revised economic outlook, with higher core inflation and higher economic growth, is causing traders to adjust their portfolios. And the Fed now only sees two potential rate cuts in 2025—half the previous forecast. So traders quickly moved to price that in. That’s why the 11 major sectors in the S&P 500 all bled. Defensive sectors such as healthcare services, agricultural machinery, and healthcare REITs saw the strongest gains.

As stocks in the S&P 500 $S&P 500 Index (.SPX.US)$ closed at their lows of the day, that suggests more dark days could be ahead before they resume their long-term uptrend. Traders will weigh up that the Fed says it needs to be cautious, and those two potential rate cuts for next year are not certain.

Some traders believe they can scoop up bargains at these levels, which is why Nvidia $NVIDIA (NVDA.US)$ Microsoft   $Microsoft (MSFT.US)$ and Meta $Meta Platforms (META.US)$ shares are all higher after-hours, giving hope for a potential rebound. But we have to wait and see what happens in the US market's Thursday and Friday sessions before rebound hopes are alive.

Nvidia shares are up up 1.1% after-hours at $130.04 after falling 1.1% to $128.91 in normal hours. Nvidia unveiled its $249 generative AI supercomputer. It's the most affordable generative AI computer yet. It fits in your hand and can power humanoids and large language models. It’s a game-changer, really. Meanwhile, positive news flows around Microsoft buying nearly 500,000 of Nvidia’s flagship Hopper chips this year.

Debt-buying ASX company Credit Corp $Credit Corp Group Ltd (CCP.AU)$ is up 5.4%, its biggest gain in 20 weeks. Meanwhile, Iress $IRESS Ltd (IRE.AU)$ shares are about 3% higher after Morgans upgraded the stock. Treasury Wine $Treasury Wine Estates Ltd (TWE.AU)$ is also higher after the company expanded its Californian business.