Interest Rate Cut

The Federal Reserve lowered its benchmark rate by 25 bps, paired with a new $40 billion Treasury‑bill purchase program and an upgraded 2026 GDP growth forecast to 2.3 %. Chair Powell dismissed further hikes, prompting equity markets to rally and expectations of a year‑end “Santa Claus” surge. Meanwhile, President Trump’s criticism of Europe’s response to the Ukraine war heightened geopolitical tension, raising risk for tech and defense sectors that rely on transatlantic coordination and joint R&D. Investors are cautioned that policy uncertainty could increase volatility.

The Fed is expected to cut rates by 25 bps to 3.5‑3.75%, but markets will focus on its forward guidance; a hawkish tone could curb equity rallies while bonds rise. Meanwhile, the US faces a growing AI talent gap with China, which graduates four times more STEM students, threatening the US lead in AI research and chip manufacturing. Companies may need higher R&D spending and policy reforms to retain talent, and investors should favor firms with strong in‑house R&D and academic ties.

Key topics include: Nvidia facing AI competition from Alphabet; Market recovery fueled by rate cut expectations and potential Fed leadership change; Ukraine peace talks progressing; Michael Burry assessing an AI bubble, Nvidia defending its position; and a hesitating housing market with rising delisting rates.

Wall Street rebounded on Friday after early AI concerns, fueled by dovish signals from the Federal Reserve hinting at potential rate cuts. Home Depot and Eli Lilly saw significant gains, with Lilly achieving a $1 trillion market cap. Global factors, including Japan’s inflation and yen carry trade, added complexity. HSBC downgraded Palo Alto Networks despite solid performance, citing decelerating sales growth, yet CNBC maintains a buy rating due to the company’s “platformization” strategy and acquisition aptitude. Upcoming week’s economic data, including retail sales and CPI, will be pivotal.

Wall Street saw its worst day since October 10th, with the Dow down 1.65%, S&P 500 down 1.66%, and Nasdaq plummeting 2.29%. Cooling AI enthusiasm, especially around Nvidia, Broadcom, and Oracle, contributed to the decline. Concerns about debt-funded AI development and uncertainty regarding a December Fed rate cut also weighed on the market. Conversely, DBS Bank projects significant revenue gains from its AI investments, expecting over $768 million USD in contributions this year.