Tech's Fragile Rally After Fed's Half-Point Cut
The Fed's aggressive 0.5% rate cut provided an initial spark for beaten-down tech stocks. But the fleeting rally shows the high-multiple sector remains precariously positioned.
Lower rates boost the present value of future earnings for richly-valued growth names like tech. The Nasdaq spiked over 1% after the Fed move before reversing course.
While delivering the first cut, Fed Chair Powell injected fresh uncertainty over how much more easing lies ahead. The central bank signaled another 50 basis points of cuts in 2024 but pushed back on expectations for lower terminal rates long-term.
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That mixed message underscores the fragility of tech's bounce. On one hand, investors crave easier policy to reignite the sector's premium valuations after 2024's beating. But more severe economic weakness requiring aggressive cuts could validate last year's recessionary fears.
After powering the post-Covid rebound, tech sold off sharply as Fed tightening punished sky-high multiples. Now the sector is stuck in purgatory - waiting for clarity on if the easing cycle has enough force to revive euphoria.
The first shot provided momentary optimism for tech's leadership revival. But lingering policy crosscurrents mean the rally is far from claiming full victory.
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