Market Turmoil: Stocks Plummet After Fed’s Interest Rate Decision
The stock market took a nosedive on Wednesday, with all three major indices experiencing significant losses. The Dow Jones Industrial Average plummeted 2.6%, or over 1,000 points, marking its 10th consecutive down session – the longest losing streak since 1974. The S&P 500 and Nasdaq Composite also suffered heavy losses, falling 3% and 3.5%, respectively.
Fed’s Hawkish Move
The Federal Reserve’s decision to cut interest rates by 25 basis points was not enough to appease investors, as the central bank signaled it would reduce the number of rate cuts in 2025. This hawkish move caught many off guard, leading to a sell-off in the market. Fed Chair Jerome Powell attributed the slower pace of cuts to higher inflation readings and expectations of higher inflation next year.
Inflation Concerns
The Fed’s updated economic forecasts revealed that core inflation is expected to peak at 2.5% next year, higher than previously projected. This has raised concerns about the central bank’s ability to bring inflation down to its 2% target. Powell emphasized that the Fed wants to see progress on inflation, which remains stubbornly above target.
Tech Stocks Take a Hit
Megacap tech stocks were among the hardest hit, with Tesla, Amazon, Apple, and Microsoft all experiencing significant losses. The tech-heavy Nasdaq Composite fell 3.5%, while the small-cap Russell 2000 index plummeted 4%.
Dow’s Longest Losing Streak
The Dow Jones Industrial Average has been on a downward trend, with its longest losing streak since 1974. The index has fallen over 3% in the past nine trading sessions, with large-cap tech stocks failing to provide a boost.
Economic Outlook
The Fed’s updated forecasts also revealed a higher growth rate for the economy next year, with GDP expected to grow at an annualized pace of 2.1%. However, the labor market is expected to remain “looser than pre-pandemic,” with the unemployment rate ticking up slightly to 4.3% in 2025.
What’s Next?
Investors will be closely watching the Fed’s next move, as well as the impact of the central bank’s decisions on the economy and markets. With inflation concerns still lingering, it remains to be seen whether the Fed will continue to take a hawkish stance or pivot to a more dovish approach.
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