Volatile Week Summary: Fed Rate Cut and Big Tech Slide (December 8–12, 2025)

This analysis is based on the Schaeffers Research report [2] and internal market data [0]. The week’s volatility stemmed from two interconnected events: the Federal Reserve’s rate decision and a Big Tech sell-off. On December 10, the Fed implemented its third 2025 rate cut (25 bps), bringing rates to 3.50%–3.75% [1]. The updated dot plot projected only one additional 2026 cut, conflicting with market expectations (68% chance of two cuts per CME FedWatch) and creating policy uncertainty [0][1].

Initially, the rate cut lifted markets, with DJI, SPX, and RUT hitting record closes on December 11 as investors rotated into cyclical sectors (Basic Materials, Consumer Defensive) [0][4]. However, Oracle’s (ORCL) 10.8% single-day drop on December 11—its worst in 11 months—triggered a sell-off in AI-exposed stocks. Oracle’s earnings revealed rising AI infrastructure spending, weak guidance, and later reports of delayed OpenAI data center buildouts [3]. The decline spread to Broadcom (AVGO, -13.5% weekly) due to margin pressure from low-margin custom AI processors, and NVIDIA (NVDA, -4.8% weekly) from sector contagion [0][3].

By December 12 midday, the tech rout affected broader markets: SPX (-0.77%), NASDAQ (-1.06%), and RUT (-1.37%) declined [0]. Sector performance reflected this shift: Technology (-1.56% December 12) underperformed, while Basic Materials (+1.83%) led gains [4].

• Policy-Market Disconnect
  : The Fed’s conservative dot plot (one 2026 cut) contrasted with market pricing, highlighting lingering uncertainty about future rate trajectories despite the December cut.
• AI Sector Vulnerability
  : The sell-off in ORCL and AVGO exposed fragilities in AI growth narratives, with investors questioning valuation sustainability and execution risks for AI infrastructure projects.
• Sector Rotation Dynamics
  : Rate cut optimism initially favored cyclicals, but tech sector contagion reversed broader market gains, demonstrating the dominance of tech sentiment on overall market performance.

• AI Sector Risks
  : Delays in AI infrastructure buildouts (Oracle) and margin pressure (AVGO) signal potential headwinds for AI-related investments.
• Valuation Concerns
  : Increased selectivity in AI stocks suggests a shift from growth sentiment to fundamentals, which may pressure high-valuation tech names.
• Regulatory Risks
  : The $72 billion Netflix (NFLX)-Warner Bros Discovery (WBD) merger faces antitrust scrutiny, while Paramount Skydance (PSKY) submitted a hostile bid [2].
• Fed Policy Risks
  : Three FOMC dissents (two for no cut, one for 50 bps) indicate divided views, with future cuts contingent on labor market weakness [1].
• Opportunity Windows
  : Cyclical sectors (Basic Materials, Consumer Defensive) may benefit from rate cut tailwinds if macroeconomic conditions remain stable.

The week ended with mixed index performance: DJI +0.39%, SPX -0.04%, NASDAQ -1.29%. Individual stock moves included ORCL (-14.7% weekly) due to earnings and AI delays, AVGO (-13.5% weekly) from margin pressure, and NVDA (-4.8% weekly) from sector contagion [0]. A data quality issue exists with Russell 2000 volume data showing 0 on December 11–12, requiring verification to confirm its record close validity [0]. Full dot plot distribution for 2026 rate projections is unavailable to assess policy uncertainty levels [1].

This report provides market context and risk identification to support decision-making. No investment recommendations are made.