The Federal Reserve's December decision is just around the corner—how will the Nasdaq 100 move?

The Federal Reserve's December interest rate decision will be announced this Thursday (December 11), marking the last FOMC meeting of 2025. The market remains hopeful for a rate cut, with an approximately 87.2% probability of a 25 bps cut, and expectations of two more rate cuts in 2026. However, Powell has previously stated that a rate cut in December is not a certainty, adding a layer of uncertainty to the market.

Complicating matters is the ongoing 43-day government shutdown, which has prevented the collection of several key economic data points. This means the Fed will have to make decisions with limited references—October non-farm payroll data will be incorporated into the November report, and October CPI was not released at all, with November CPI scheduled for release on December 18. The absence of these two critical reports is likely to intensify internal disagreements within the Fed.

Based on available data, the US unemployment rate in September rose to 4.4%, and the September PCE inflation index increased by 2.8% year-over-year, roughly in line with expectations. US-China trade relations have eased, and inflationary pressures may be a "one-off" phenomenon, providing some confidence for a rate cut. However, investors are more concerned about the Fed's future policy stance. Considering that monetary policy effects typically lag by about six months, and Powell will step down in May next year, the market expects the Fed to only cut by 25 bps in December, with no further moves in the first half of the year. If Powell emphasizes higher thresholds for future rate cuts after the meeting, a "drop the mic" moment could trigger a sell-off in risk assets.

JPMorgan's strategic analysis team recently issued a warning, stating that expectations for Fed rate cuts have been fully priced into stock prices, and the recent rally in the Nasdaq 100 could face profit-taking risks. Investors tend to lock in gains before year-end rather than increase positions further. However, JPMorgan remains optimistic about the medium-term outlook, believing that the Fed's dovish stance should support the stock market. Low oil prices, slowing wage growth, and easing tariffs all favor a policy easing without fueling inflation.

Rising US Treasury yields pose new concerns, putting pressure on tech stocks

Notably, US Treasury yields have recently surged across the board. The 10-year Treasury yield rose by 5.6 basis points to 4.196%, while the 2-year yield increased by 4.4 basis points to 3.608%. This rise is mainly driven by widening risk premiums—investors' concerns over US credit ratings, policy certainty, asset volatility, and government debt repayment capacity. On Monday, the VIX fear index jumped 8.25%, and the MOVE index increased by 7.46%, reflecting heightened market anxiety.

Higher Treasury yields will directly constrain the upside potential of tech stocks, as higher rates reduce the relative attractiveness of these high-growth equities. Overall, the Nasdaq 100 is currently in a sluggish upward phase, indicating increased market divergence between bulls and bears. While the overall upward trend is unlikely to reverse in the short term, investors should remain alert to the risk of renewed selling pressure.

Technical analysis: Weak breakout, risks emerging

Looking at the Nasdaq 100 daily chart, the index faces resistance above 26,000 points. Failure to break through effectively could form a double-top pattern. A conservative estimate suggests the index may retest support below 24,000 points, with the key level between bulls and bears at 25,200 points. Short-term investors should closely monitor these critical levels to adjust their strategies accordingly.