Dec 19 Thursday, US: Dow Jones dips 1,100 points after the Feds Hawkish rate cuts. The US stock market experienced a significant low on Dec 19. This transpired after the Federal Reserve announced a 25-basis point interest rate cut. While the rate cut was widely anticipated it was not unanimous which was evident from the market’s reaction.
The Dow Jones Industrial Average plunged over 1,100 points. It ended the day at about 1,123 points or 2.6 % after the Fed signaled in a statement that it is forecasting just 2 interest rate cuts in 2025 and not the previously projected 4 cuts. This dip reflects investor’s concerns about the Fed’s future monetary policy. The Fed anticipates inflation will remain firmly above its target range for longer than it had initially anticipated. This dip reflects investors’ concerns about the Fed’s future monetary policy. The Dow has fallen for 10 days in a row, the first time it has had a losing streak so long since October 4, 1947, when the index fell for 11 sessions straight.
Fed’s Cautious Stance
The Fed’s tone was more hawkish than expected despite the rate cut. Fed Chair Jerome Powell said in the Wednesday conference that the reserve may slow down the pace of further interest cuts, citing concerns about inflation. Investors expected the Fed to cut rates by a quarter point which the Central Bank did but the markets toppled after the Fed’s statement of just 2 cuts next year. Which was an indication that the monetary conditions would be difficult. Hence, investors were caught off guard leading to a sharp sell-off across major stock indices.
Market Reactions
- Dow Jones Industrial Average: The Dow Jones Industrial Average had declined more than 1,100 points, becoming the index’s tenth session in a row of loss and its largest one-day drop since early August.
- S&P 500 and Nasdaq Composite: Other indices also declined substantially. The S&P 500 fell by 2.9%, and the Nasdaq Composite dropped by 3.6%.
- Treasury Yields: Treasury yields increased, showing that investors have become more concerned about inflation and future interest rate increases.
The future economic landscape will keep the investor focused on what the Fed is doing with its policies and how this impacts the stock market. Keeping oneself updated and discussing it with a financial advisor would be necessary to make a sound investment decision. Keep reading Quetsiqa.com for more such updates.
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