US stocks tank as Fed signals slower pace of rate cuts
U.S. stocks tumbled on Wednesday (Dec. 19), following the Federal Reserve's indication that it may reduce interest rates at a slower pace in 2025 than previously anticipated.
The Dow Jones Industrial Average fell 1,123.03 points, or 2.58 percent, to 42,326.87, its biggest loss since August and the worst losing streak since an 11-day slide in 1974. The S&P 500 sank 178.45 points, or 2.95 percent, to 5,872.16. The Nasdaq Composite Index shed 716.37 points, or 3.56 percent, to 19,392.69.
All of the 11 primary S&P 500 sectors ended in red, with consumer discretionary and real estate leading the laggards by losing 4.74 percent and 3.97 percent, respectively. Health posted the weakest decline, down 1.38 percent.
The Fed reduced its benchmark interest rate by 25 basis points on Wednesday, setting the target range to 4.25 percent to 4.50 percent. This marked the third consecutive rate cut since September as policymakers aim to bolster economic growth while addressing concerns about inflation and employment.
After delivering the latest rate cut, Fed Chair Jerome Powell stated Wednesday the central bank is "significantly closer" to reaching a point where no additional rate reductions will be necessary. "As we think about further cuts, we're going to be looking for progress on inflation," said Powell, noting, "We have been moving sideways on 12-month inflation."
Fed officials estimated two interest rate cuts next year, fewer than four seen in September, as they marked up their projections for core inflation and economic growth next year, while lowering their forecast for the unemployment rate in 2025.
JPMorgan's chief global strategist David Kelly believes the central bank is laying the groundwork to have a more cautious approach to monetary easing next year. "Right now, there is sort of this lull between administrations. At some stage, there will be some pressure on them from the administration to make it easier. They are putting a stake in the ground saying, 'This is what you should expect from us' so they can try to avoid or postpone any fight with the administration next year or in 2026," he said.
The 10-year U.S. Treasury yield added over 11 basis points on Wednesday, topping 4.5 percent. Meanwhile, most stocks turned red following the Fed decision. Broadcom was one of the biggest laggards, falling 6.91 percent, as its strong run-up earlier this year cooled. Tesla dropped 8.28 percent amid concerns about slower growth in the electric vehicle sector. Microsoft, Meta Platforms, and Alphabet saw declines of over 3 percent, while Amazon dropped by 4.6 percent.
(Source: Xinhua)
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