Nasdaq 100 Drops More Than 1% as Bond Yields Surge

Core Viewpoint - The Federal Reserve's recent interest rate cut was anticipated and reflects a cautious approach without committing to future cuts, indicating a hawkish stance [1][5]. Group 1: Federal Reserve and Interest Rates - The Fed's decision to cut rates aligns with market expectations, and there is an increasing number of dissents within the committee, which may enhance the perception of its independence [2][5]. - The labor market remains a critical factor influencing the Fed's decisions, with potential for more cuts if labor market conditions deteriorate [5][6]. Group 2: Earnings and Market Performance - Recent earnings reports have shown positive surprises, particularly in the third quarter, contributing to a broadening market performance where 54% of S&P constituents have outperformed the index [6][7]. - There is a noticeable deceleration in earnings growth among mega-cap tech stocks, while the rest of the market is experiencing an accelerating pace of earnings growth, supporting a more diversified market [8][9]. Group 3: Investment Opportunities - Despite frothy valuations, there are opportunities for value investments, particularly in sectors that have shown resilience and growth potential [10][12]. - The Russell 2000 index shows that non-profitable components are outperforming profitable ones, suggesting a need to focus on companies with strong fundamentals and positive earnings trends [13][14].