The Fed cut rates by 25 basis points to a range of 4.25%-4.50% and its Summary of Economic Projections (SEP) showed it would cut rates by a total of half a percentage point by the end of 2025, given the tight labor market and the recent stall. In reducing inflation.
Investors were looking to comments from Fed Chair Jerome Powell for further insight into the path of central bank interest rates.
“It looks like some initial concerns about tariffs may have dissipated in the Fed’s projections. They see fewer rate cuts in 2025, slightly higher inflation, and a modest increase in the unemployment rate,” said Brian Jacobsen, chief economist at the Annex. Wealth Management in Menomonie Falls, Wisconsin.
“Fed May Slow Pace of Rate Cuts Thanks to Strong Economy.”
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The Dow Jones Industrial Average fell 523 points, or 1.2%, to 42,926.44, the S&P 500 fell 93 points, or 1.54%, to 5,957.30 and the Nasdaq Composite fell 409 points, or 2.03, to 3,030.03.
The Dow was on track for its 10th straight session decline, which would mark its longest daily loss since an 11-session skid in October 1974.
Also Read: Inflation risks roughly balanced as rate cuts signal: Fed Chair Jerome Powell
Despite recent declines, the Dow is up nearly 15% for the year, while the S&P is up nearly 26% and the Nasdaq is up nearly 33%, largely lifted by technology companies and the prospect of a low-rate environment with excitement around artificial intelligence and, more recently, President- President-elect Donald Trump’s administration hopes for deregulation policies in the coming term
Each of the 11 major S&P 500 sectors was lower, with real estate leading the decline.
US Treasury yields rose after the statement as the benchmark US 10-year note rose 6.3 basis points to 4.448%.
Higher interest rates are generally seen as a drag on equity markets, boosting the appeal of less risky assets while reducing companies’ ability to grow earnings.
In company news, Birkenstock rose 4.7% after the footwear maker beat market expectations for fourth-quarter results, while General Mills fell 3.8% as the Cheerios maker cut its annual profit forecast.
Declining issues outperformed advancers by a 3.69-to-1 ratio on the NYSE and by a 2.48-to-1 ratio on the Nasdaq.
The S&P 500 posted six new 52-week highs and 15 new lows, while the Nasdaq Composite hit 78 new highs and 147 new lows.
Also Read: US Federal Reserve cuts key interest rates by 0.25%
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