Interest Rate Freeze and DeepSeek Shock Aftermath… Closing Lower [New York Stock Market Briefing]

The New York Stock Exchange fell as the Federal Reserve (Fed) decided to freeze interest rates. The aftershocks of the Chinese AI startup 'DeepSeek' shock also persisted.

On the 29th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, a group of blue-chip stocks, closed at 44,713.52, down 136.83 points (0.31%) from the previous session. The large-cap benchmark S&P 500 Index fell 28.39 points (0.47%) to 6,039.31, and the tech-heavy Nasdaq Composite Index recorded 19,632.32, down 101.26 points (0.51%).

The Fed decided to maintain the benchmark interest rate at the current level (4.25~4.50%) for the next six weeks through the Federal Open Market Committee (FOMC) regular meeting, the first of the year. This is the first freeze decision since the Fed began easing monetary policy last fall. The Fed had initiated a rate cut cycle with a 50bp (1bp=0.01%) 'big cut' last September, followed by 25bp cuts in November and December.

Since the decision was already anticipated, the market impact was relatively limited. Jerome Powell, the chairman of the Fed, said at a press conference that the strong economic situation in the U.S. and the uncertainty brought by policy changes under the Donald Trump administration should be considered, stating, "We do not need to rush to change the monetary policy stance." Bond yields fell slightly after the Fed's rate decision.

According to the electronic trading platform Tradeweb, the yield on the 10-year U.S. Treasury note was 4.54% at the close of the New York Stock Exchange, showing little change from the same time the previous day. The 10-year Treasury yield briefly rose to 4.59% immediately after the Fed's monetary policy direction statement was released, but gave up the gains as Powell's press conference was interpreted as dovish (favoring monetary easing).

In the Fed's monetary policy direction statement, the phrase 'progress towards the 2% inflation target' was removed, leading some in the market to interpret it as a 'hawkish (favoring monetary tightening) signal,' but Powell warned against overinterpretation, saying it was merely a choice to shorten the sentence.

NVIDIA's stock showed signs of not yet recovering from the DeepSeek shock. NVIDIA plunged 16.97% on the 27th, rebounded 8.93% the previous day, but slipped 4.10% again today. It was reported that influential economic media stated that "after the emergence of the DeepSeek AI model, Trump administration officials are considering additional restrictions on exports of NVIDIA AI chips to China." There were also discussions about strengthening regulations on the low-spec product H20, designed by NVIDIA to meet export requirements to China.

NVIDIA's stock, once called the 'darling of the AI era,' has plunged nearly 15% this week alone.

Among the 'Magnificent 7' stocks set to release earnings reports after the market closed, Microsoft (down 1.09%) and Tesla (down 2.26%) fell, while Meta, the parent company of Facebook, rose 0.32%. Apple, which will announce its earnings the next day, rose 0.46%. Alphabet (Google's parent company) was slightly up, and Amazon, after setting intraday and closing record highs the previous day, fell back 0.45% today.

ASML, the world's largest semiconductor equipment company based in the Netherlands, released a report showing a 169% surge in fourth-quarter net bookings compared to the previous quarter, and its stock jumped 4.29%. Global coffee chain Starbucks saw its stock soar 8.14% after hinting at a full-scale turnaround in its earnings report released the previous day. Major telecom company T-Mobile saw its stock jump 6.34% on optimistic annual guidance.

Trump Media & Technology Group, the parent company of the social media 'Truth Social' founded by President Trump, announced its entry into financial services and fintech, boosting its stock by 6.76%. Application service specialist F5 saw its stock surge 11.40% after releasing a second-quarter earnings outlook that exceeded Wall Street expectations. Nextracker, the world's largest supplier of solar tracking devices, presented strong guidance along with good earnings, causing its stock to soar 24.28%.

According to the FedWatch tool from the CME Group, as of the close of trading today, the probability of the Fed cutting rates by 25bp in March was reflected at 18.0%, with an 82.0% probability of a freeze. The Volatility Index (VIX), compiled by the Cboe, was 16.56, up 0.15 points (0.91%) from the previous session.

Hye-won Ahn, Hankyung.com reporter anhw@hankyung.com