Nasdaq Plunges $1 Trillion as Investors Brace for Fed Hikes

Stock indices experienced a significant downturn, with the Nasdaq Composite recording its worst weekly and daily decline in over a year. Chipmaker shares, previously market leaders, were at the forefront of this extensive sell-off, leading to a $1 trillion slump in the Philadelphia Stock Exchange's semiconductor index market capitalization.

This market rout drew criticism from then-US President Donald Trump, who argued that strong employment figures should have spurred a rally, not a decline. He asserted that economic growth does not equate to inflation and suggested that rumored rate hikes were unsettling investors unnecessarily.

The slump in the Nasdaq dampened global risk appetite, concurrently boosting demand for the US dollar as a safe-haven asset. This effect was amplified by ongoing exchanges of strikes between Iran and Israel, indicating a potential escalation in the Middle East conflict.

Meanwhile, the European Central Bank (ECB) faces growing conviction in the Forex market that any monetary policy tightening would be a political misstep, drawing parallels to the 2008 global economic crisis and events in 2011. In those instances, a weak eurozone economy compelled the central bank to lower rates after initial increases.

Goldman Sachs revised its forecast, abandoning earlier predictions of federal funds rate cuts in late 2026 and early 2027. The anticipated monetary easing is now pushed back to mid-2027 and late 2027. If both the Fed and the ECB implement single rate hikes in 2026, the interest rate differential between them is unlikely to narrow, potentially supporting downward pressure on the EURUSD pair.