Nasdaq Gains Over 300 Points Post Inflation Data; Fear & Greed Index Shifts to "Fear" Zone

On December 18, 2025 (EST), the U.S. released November Consumer Price Index (CPI) data showing 2.7% year-over-year (YoY) inflation [1]. This data reduced investor concerns about prolonged high inflation and potential Federal Reserve rate hikes, driving a broad market rally. The Nasdaq Composite (a tech-heavy index) outperformed the S&P 500 and Dow Jones, consistent with growth stocks benefiting from reduced rate hike expectations [0]. The CBOE Volatility Index (VIX) also declined by 4.2% to 16.87, suggesting lower short-term market uncertainty [0].

Despite these gains, the CNN Money Fear & Greed Index shifted to the “Fear” zone [2]. The index aggregates multiple factors including stock price momentum, put/call ratio, market volatility (VIX), junk bond demand, market breadth, and safe haven demand. Since the VIX declined, other components of the index likely drove this shift, pointing to underlying investor caution.

1. Sentiment-Market Disconnect
   : The contrast between strong index gains and the Fear & Greed Index moving to “Fear” highlights investor uncertainty about the sustainability of the inflation decline, future Fed policy, or unaddressed market headwinds.
2. Tech Sector Sensitivity
   : The Nasdaq’s 1.38% gain underscores the sensitivity of growth stocks (dominant in tech) to interest rate expectations—reduced rate hike concerns typically benefit growth stocks with long-duration cash flows.
3. Mixed Volatility-Sentiment Signals
   : The decline in the VIX (volatility) suggests improved near-term market stability, but the shift to “Fear” indicates lingering negative sentiment from other market indicators.

• Sentiment Reversal
  : If investors focus on negative signals driving the Fear & Greed Index, it could lead to selling pressure that erodes December 18 gains.
• Inflation Volatility
  : Future inflation reports may not continue to show decline, reigniting concerns about Fed policy tightening.
• Narrow Market Breadth
  : If gains are limited to the tech sector, the rally may not be sustainable as broader market participation is needed for long-term upward momentum.

• Growth Stock Tailwinds
  : If reduced rate hike expectations persist, tech and growth stocks could continue to benefit.
• Sentiment Improvement
  : Calmer inflation data and clear Fed guidance could help the Fear & Greed Index move out of the “Fear” zone, supporting broader market gains.

This report summarizes the following key data points from December 18, 2025:

• November 2025 CPI: 2.7% YoY [1]
• Nasdaq Daily Gain: 313 points (+1.38%) [0]
• S&P 500 Daily Gain: 53 points (+0.79%) [0]
• Dow Jones Daily Gain: 66 points (+0.14%) [0]
• VIX Close: 16.87 (-4.20%) [0]
• CNN Money Fear & Greed Index: Moved to “Fear” zone [2]

The analysis provides objective market context and does not offer investment advice. Decision-makers should monitor upcoming Fed meetings, monthly inflation reports, and sentiment indicators to assess future market dynamics.