Meta Carnage, Twitter Uncertainty Pressure NASDAQ, While S&P 500, Dow Investors Bank on Softer Fed

With the short-term spotlight on whether the Federal Reserve goes soft on its aggressive interest rate strategy starting in December, investors should note policymakers are still laser-focused on their mandate to drive inflation back to the 2% level.

That being said, it could be difficult for some investors to differentiate between cutting the pace of rate hikes from 75-basis points to 50-basis points and stopping rate hikes altogether.

There is a sense this week that the Fed could start to slow its aggressive tightening cycle. Certainly, the chatter surrounding this event has lifted sentiment while taking the edge off a dollar rally. But it’s dangerous to take the optimism too far because there are still problems out there that could flip sentiment to the negative side quickly.

Investors Split Ahead of Opening

Ahead of Thursday’s opening, the major averages seem to be split over the potential impact of an earlier than expected exit from the Fed’s aggressive tightening cycle. Dow investors seem to like the news, but S&P 500 Index investors appear to have mixed feelings. Meanwhile, NASDAQ Composite investors would rather concentrate on earnings and company news.

The point is investors are still facing headwinds that may have nothing to do with whether the Fed pivots early. These headwinds include trouble at Meta Platforms and Elon Musk’s takeover of Twitter. Both potentially bearish events could dominate the NASDAQ trade while the rest of the investing community focuses on what the Fed is going to do about rate hikes in December.

NASDAQ Weakens as Meta Weighs on Tech Sector

Yes the U.S. GDP could weaken enough to encourage investors to bet heavily on some kind of a small pivot by the Fed in December. Yes, this could put pressure on interest rates and yes, a dip in Treasury yields could be bullish for stocks. But not all investors are banking on these moves taking place.

The sell-off in the tech-weighted NASDAQ Composite could continue on Thursday as shares of Meta Platforms Inc sank 20% after the Facebook parent’s costly metaverse bets and the impact of soaring inflation on ad spending spooked investors.

Meta was set to lose about $67 billion in market value, if losses hold through the session, adding to the trillions of dollars that some of the biggest tech names have shed this year in the face of rising interest rates and a stronger dollar, Reuters wrote.

NYSE to Suspend Trading of Twitter Shares as Musk Nears Takeover

Twitter Inc shares will be suspended from trading on Friday, the New York Stock Exchange’s website showed, as billionaire Elon Musk faces a court-ordered Oct. 28 deadline to close his $44 billion deal to buy the social media company.

More Pain for Tech Traders

Both the sell-off in Meta Platforms and the uncertainty surrounding Twitter are two developments that could offset any good news about the economy in today’s GDP report and expectations of a shift by the Fed toward slower rate hikes.