Tesla and Broadcom's stock prices plummet as investors' sentiment is impacted by the FRB's revised interest rate cut outlook.

Amidst significant ripples in technology stocks, the stock prices of Tesla and Broadcom plummeted. Tesla recorded an 8.3% decline, while Broadcom saw a 6.9% drop. This is due to the new financial policy outlook announced by the Federal Reserve Board (FRB). Although the FRB cut the policy interest rate by 0.25% this time, they reduced the number of rate cuts for 2025 from the previous 4 times to 2 times, and raised the terminal rate to 3.125%. As a result, long-term interest rates rose, putting downward pressure on the stock market.
In addition, the FRB upwardly revised the GDP growth rate outlook from 2024 to 2025 and lowered the forecasted unemployment rate, but high inflation rates are still expected to persist. The market perceives this as a cautious policy stance, drawing attention back to economic uncertainty. Growth stocks like Tesla and Broadcom are particularly susceptible to this impact, resulting in a cooling of investor sentiment.

The Federal Reserve Board's policy adjustment this time was unexpected by the market. Normally, a rate cut provides reassurance to the market, but this time it triggered a different reaction. The key factor was the reduction of the number of rate cuts for 2025 from 4 times to 2 times. Furthermore, with the FRB raising the terminal rate to 3.125%, investors are concerned about the possibility of a prolonged high-interest environment. Consequently, the yield on the US 10-year Treasury bond, indicative of long-term interest rates, increased, raising the cost of investment in growth stocks.
High-growth stocks like Tesla and Broadcom are particularly vulnerable to the impact of rising interest rates. The background of the sharp decline in stock prices may be attributed to the adjustment that both companies were forced to make in a high-interest rate environment while high growth expectations persisted. NVIDIA also experienced temporary volatility and the entire semiconductor sector seemed to overreact to this policy adjustment. As reported by Bloomberg, the market sentiment post-policy change is showing a "clear retreat trend".
Such market turbulence should also be seen in light of contradictions with the FRB's economic growth outlook. While the GDP growth rate has been upwardly revised and a decrease in the unemployment rate is anticipated, these seem to contradict the tightening tendency of interest rate policy. This gap underscores the market's sense of uncertainty.
Impact on the technology sector indicating changes in the market

The FRB's policy adjustment extends beyond just interest rates. The entire technology sector, symbolizing growth stocks, is now facing the challenge of how to adapt to this change. For example, Tesla is pushing for sales expansion through price cuts on its main products, but in a high interest rate environment, there is a high possibility that profit margins will be squeezed. Similarly, Broadcom is aiming to expand market share against the backdrop of growth prospects in the semiconductor industry, but there are concerns about the risk of a decrease in customer companies' equipment investment appetite due to the impact of interest rates.
As a result, companies are required to seek strategies to respond to market headwinds, but what is important is the change in investor psychology. According to CNBC's analysis, investors are shifting from the previous 'growth supremacy' to a more cautious asset allocation strategy. This could lead to a higher possibility of funds flowing out of growth-stock-centered portfolios into defensive sectors.
On the other hand, these market fluctuations will also serve as a touchstone to test the competitiveness of technology companies in the long term. By implementing sustainable growth strategies, companies have the potential to overcome market instability and regain high valuation. Investment in innovative sectors such as AI and renewable energy is predicted to be crucial.

This policy adjustment clearly indicates that the FRB is still prioritizing inflation management. The background to the upward revision in inflation forecasts is attributed to the instability of energy prices and the strength of the labor market. On the other hand, the stance of not fully complying with the market's demand for low interest rate policies has highlighted the cautious attitude of the FRB.
Opinions are divided on the impact this policy will have on the overall economy. While there are positive factors such as expected increases in growth rates and decreases in unemployment rates, concerns persist about the difficulty high interest rates will pose for funding small and medium-sized enterprises and startups. Additionally, the challenges of striking a balance between high inflation and low interest rates will be a factor testing the long-term credibility of the FRB.
Given this situation, the market needs to closely monitor the FRB's next move. In particular, the focus will be on how changes in economic indicators will affect the direction of the policy. Among experts, there are suggestions that the FRB may maintain a cautious approach while being prepared to make flexible policy changes as needed.