US Stock Market Sees Volatility: Micron's Plunge and Macroeconomic Factors Combine

US Stock Market Sees Volatility: Micron's Plunge and Macroeconomic Factors CombineDecember 19th saw a mixed performance in the US stock market. The Dow Jones Industrial Average edged up 0

US Stock Market Sees Volatility: Micron's Plunge and Macroeconomic Factors Combine

December 19th saw a mixed performance in the US stock market. The Dow Jones Industrial Average edged up 0.04%, ending a 10-day losing streak, while the Nasdaq Composite fell 0.1% and the S&P 500 dipped 0.09%. Large tech stocks showed divergence, with Nvidia, Netflix, and Amazon rising over 1%, while Intel fell over 1%, and Tesla, Microsoft, and Meta experienced slight declines. However, the day's most striking event was the dramatic plunge in Micron Technology's stock price.

Micron's Below-Expectation Earnings Report Triggers Sharp Drop

Micron Technology's after-hours release of its fiscal first-quarter 2025 earnings report (ending November 28th), showing a mixed performance, sent shockwaves through the market. The report revealed total revenue of $8.71 billion, an 84.3% year-over-year and 12.4% quarter-over-quarter increase, meeting market expectations. Non-GAAP net income reached $2.04 billion, a 52% increase quarter-over-quarter, and earnings per share (EPS) came in at $1.79, exceeding the analyst average estimate of $1.76 and outperforming both the previous year and quarter. Strong orders for AI computing components were a positive, but weak demand from mobile and PC manufacturers, contributing 75% of Micron's Q1 revenue, weighed on overall performance.

However, Micron's second-quarter guidance significantly undershot market expectations. The company projected sales of approximately $7.9 billion for the fiscal second quarter (ending February), considerably lower than the analyst consensus of $8.99 billion. Adjusted EPS is expected to be no more than $1.53, far below the market forecast of $1.92. This is primarily attributed to falling prices for DRAM memory chips used in mobile phones and personal computers, a market still struggling with weak consumer demand and oversupply.

This caused Micron's stock price to plummet nearly 18% in after-hours trading, wiping out $17.82 billion (approximately RMB 130 billion) in market capitalization overnight. Analysts noted that as the largest US computer memory chip manufacturer and one of the world's three largest memory manufacturers, Micron's guidance could impact investor confidence in other similar global companies.

Federal Reserve Policy and Macroeconomic Data Influence Market Sentiment

Beyond Micron's report, Federal Reserve policy and macroeconomic data significantly impacted market sentiment. In his post-December FOMC meeting press conference, Fed Chair Jerome Powell reiterated that the Fed does not intend to include Bitcoin in its balance sheet and suggested that inflation next year will be higher than anticipated, with only two rate cuts expected in 2025 instead of the previously projected four. This surprised the market and fueled investor concerns.

Powell stated that the Fed is restricted by the Federal Reserve Act in the types of assets it can hold and isn't seeking to change that; any legal changes would need to come from Congress. This implied a relatively hawkish stance on monetary policy going forward, putting pressure on the stock market.

Art Hogan, managing director and chief market strategist at B. Riley Financial, described the Fed's pronouncements on rates and inflation as "a punch to the gut for the market, creating panic across the board." The Dow had risen nearly 2800 points since the election, but the Fed's statement almost entirely erased those gains, leaving only a 100-point increase from the election as of Wednesday. The markets sharp reaction highlights the uncertainty surrounding the future economic outlook.

John Bilton, global head of multi-asset strategy at JPMorgan Asset Management, offered a more optimistic view, calling it a "healthy correction" in an otherwise sound economic environment.

It's noteworthy that despite the gloomy market sentiment, recent economic data indicates continued US economic strength. Third-quarter GDP grew at a 3.1% annualized rate, exceeding the expected 2.8%; consumer spending growth was revised upward to 3.7%; jobless claims fell to 220,000 last week, below expectations; and the core personal consumption expenditures (PCE) price index rose 2.2% quarter-over-quarter (annualized), beating forecasts. This contrasts with the Fed's relatively pessimistic projections and adds to the market's complexity.

Other Market Performance

Beyond US equities, other markets experienced volatility. Bitcoin fell below $98,000, dropping over 3% in 24 hours, with total liquidations reaching $1.037 billion (approximately RMB 7.6 billion). International oil futures also declined, with WTI January crude futures closing down 0.95% and Brent February crude futures down 0.69%. Popular Chinese stocks showed mixed results, with the Nasdaq Golden Dragon China Index falling 0.06%.

Conclusion

December 19th presented a complex and volatile picture for the US stock market. Micron's disappointing earnings report triggered a sharp drop in its share price, highlighting challenges facing the tech sector. Meanwhile, the Fed's policy statement and robust macroeconomic data interacted to influence market sentiment. Investors need to closely monitor the Fed's future policy direction, economic data changes, and tech sector dynamics to make informed investment decisions.

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