In This Article:
What Happened?
Shares of exercise equipment company Peloton (NASDAQ:PTON) fell 7.6% in the morning session after the major indices declined sharply (Nasdaq down 1.9%, S&P 500 down 1.1%) as investors appeared to be locking in some gains in a year marked by significant progress in the Fed's effort to deliver a soft landing—taming inflation without causing more damage to the economy—despite early signs of weakness in the labor market.
With two more trading days to wrap up the year, investors are likely hoping for a "Santa Claus Rally." So far, the Nasdaq has climbed more than 30% year to date, while the S&P 500 has gained over 25%, reflecting the resilience of the U.S. economy.
The improved momentum, especially in the second half of the year, was fueled by the ongoing investment in AI within the tech sector, the Fed's continued dovish shift as inflation cooled, enabling the Powell-led committee to deliver three rate cuts (0.5% in September and 0.25% each in November and December).
Additionally, the November 2024 elections sparked optimism for more business-friendly regulations in energy, tech, and industrials following Donald Trump's return to the presidency.
Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
The shares closed the day at $9.41, down 8.3% from previous close.
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What The Market Is Telling Us
Peloton’s shares are extremely volatile and have had 64 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when PTON dropped 8.4% as stocks tumbled (Nasdaq down 1.3%, S&P 500 down 1.1%) after the Fed signaled that there would be fewer cuts ahead than expected during the December 2024 FOMC meeting. This announcement followed the committee's decision to reduce rates by 0.25% to a range of 4.25%–4.5%, which was largely in line with consensus forecasts.
Looking ahead to 2025, the Fed is expected to implement two quarter-point rate cuts, suggesting that future policy adjustments will be implemented at a slower pace, with the committee reiterating a data-driven approach that factors future inflation data and updates on the labor market.