Wall Street entered Tuesday’s (Dec. 9) trading session with high expectations of a speculative rally ahead of the Federal Reserve’s final interest rate decision of 2025. Instead, investors were met with turbulence. A sharp warning from JPMorgan Chase (JPM-US) sent shockwaves through the Dow Jones, while Nvidia’s much-anticipated export approval to China turned sour under new conditions. Bond yields climbed again, adding to the unease. By the close, the three major indices were mixed: the S&P 500 slipped, the Dow fell, and the Nasdaq eked out a narrow gain.
JPMorgan’s Spending Shock
The biggest headline was JPMorgan’s 4.7% plunge, its steepest single-day drop since April. The sell-off followed the bank’s 2026 guidance, projecting spending to soar to $105 billion. The figure reflects rising regulatory costs and heavy investment in AI-driven fintech, but analysts worry it signals broader industry pressures.
Wall Street fears a double hit: wage inflation and technology transformation costs eroding profitability across the banking sector. As the largest U.S. bank, JPMorgan’s warning carried outsized weight, dragging down both the Dow and S&P 500.
Nvidia’s "Trump Tax" Surprise
In tech, investors initially expected a rally after President Trump announced Nvidia could export its advanced H200 AI chip to China. But the approval came with a catch: Nvidia must pay 25% of sales revenue to the U.S. government.
Instead of celebrating, Nvidia’s stock slipped 0.3%. Analysts cited three reasons:
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Profit squeeze: The 25% levy acts like a windfall tax, cutting into margins.
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Product cycle risk: The H200 will be outdated by late 2025, replaced by the Blackwell architecture, raising doubts about demand.
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Geopolitical uncertainty: Beijing could retaliate, limiting purchases and undermining the deal’s value.
What was meant to be a bullish catalyst turned into a bearish signal, highlighting the fragility of tech sentiment under geopolitical constraints.
Bond Market Alarms
Beyond equities, the bond market sent troubling signals. The yield on the 10-year U.S. Treasury note rose for the fourth straight day, hitting 4.18%. Normally, yields fall ahead of rate cuts. The rebound suggests investors fear inflation’s resurgence or a more complicated Fed easing path.
Higher yields directly suppress equity valuations, explaining why Tuesday’s rally fizzled. For traders, the bond market’s message was clear: caution ahead of Powell’s press conference.
Labor Market Data: A Mixed Picture
The JOLTS Job Openings Report showed a slight uptick in October openings, but overall hiring remains weak. The data gives the Fed justification to cut rates, while still signaling the economy hasn’t collapsed.
According to CME FedWatch, traders see an 87% probability of a 25 basis point cut Wednesday. Yet the bigger question is what comes next. Investors expect Powell to announce a "wait-and-see" period, monitoring how Trump’s new policies affect inflation before committing to further easing.
Consumer Stocks Reflect Strain
Individual stock moves underscored consumer pressures:
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AutoZone (AZO-US): Dropped 7.2% after weak earnings, suggesting even auto repair demand is tightening.
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Campbell Soup (CPB-US): Fell 5.2%, signaling that price hikes in food are hitting a ceiling as consumers push back.
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Warner Bros. Discovery (WBD-US): Rose 3.8% on rumors of a bidding war with Netflix and Skydance, highlighting ongoing M&A momentum in media.
These moves show consumer budgets tightening while corporate deal-making remains active.
Investor Sentiment: Fog Ahead
Trading volume was just 14.5 billion shares, below average, reflecting a cautious stance. Large funds are waiting for clarity from the Fed.
For investors, Wednesday’s decision is less about the cut itself—already priced in—and more about Powell’s dot plot revisions and his language on 2026 inflation. If Powell signals that "inflation is not fully defeated" or hints at pausing cuts, markets could face renewed downward pressure.
The Bigger Picture
Tuesday’s session captured the uneasy balance facing Wall Street:
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Banks are warning of rising costs.
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Tech is caught between geopolitical deals and profit risks.
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Bonds are flashing inflation alarms.
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Consumers are tightening wallets.
Against this backdrop, Powell’s words carry enormous weight. Investors are hoping for reassurance without complacency, clarity without hawkishness.
Conclusion: Powell’s Tightrope
The Fed’s December meeting is shaping up as a pivotal moment. A 25 basis point cut is expected, but the real test lies in Powell’s ability to balance weak labor data, inflation risks, and political pressures.
For markets, the fog remains thick. Whether Powell clears the path or deepens uncertainty will determine if Wall Street ends 2025 on a high note—or braces for turbulence in 2026.