Wall Street Declines Following Federal Reserve's Rate Cut Guidance

Traders were busy on the floor of the New York Stock Exchange (NYSE) on December 18 as news broke about the Federal Reserve's recent policy meeting. Wall Street experienced a significant drop, with the Dow Jones Industrial Average plummeting by over 1,100 points.

The decline followed the Federal Reserve's decision to cut interest rates by 25 basis points, a move that had been anticipated by many. However, Federal Reserve Chair Jerome Powell indicated that future reductions would be more gradual than previously expected.

This marked the Dow's tenth consecutive day of losses, making it the longest losing streak since 1974. Along with the Dow, both the Nasdaq and S&P 500 also recorded their largest daily declines in months.

Market Reactions to Fed Announcement

After the announcement, benchmark Treasury yields rose, indicating market reactions to the adjusted pace of future rate cuts. The U.S. dollar also strengthened against other currencies. Ryan Detrick, chief market strategist at Carson Group, stated, "You tend to see knee-jerk reactions on Fed Day, but often cooler heads prevail the next day." Detrick emphasized that despite the current volatility, the economy remains strong.

The Federal Open Market Committee (FOMC) moved to cut the Fed funds target rate, but they revised their forecast for future rate cuts. The central bank now expects only two rate cuts by the end of 2025, a decrease from four projected cuts stated in the previous month.

During the press conference, Powell reassured attendees of the economy's strength, stating that inflation is nearing the targeted 2 percent rate and that current monetary policy is well-prepared to handle any potential risks.

Market Performance Highlights

The market reacted as follows in the wake of the Fed's decisions:

• The Dow Jones Industrial Average closed down 1,123.03 points, or 2.58 percent, at 42,326.87.
• The S&P 500 fell by 178.57 points, or 2.95 percent, ending at 5,872.03.
• The Nasdaq Composite dropped 716.37 points, or 3.56 percent, finishing at 19,392.69.

Earlier in the day, European stocks had posted modest gains due to technology shares and French automaker Renault, although these gains were tempered as the market anticipated the Fed's rate decision.

Emerging market stocks and Asia-Pacific shares also suffered losses, reflecting global uncertainty. Yields on U.S. Treasury bonds climbed after the Fed's announcement, indicating investors' adjusted expectations.

Currency and Commodity Movements

The U.S. dollar saw a boost, with its index rising by 1.09 percent, while the euro fell against the dollar. Bitcoin also took a hit, dropping by 5.17 percent to $100,916.00 after Powell indicated the Fed's lack of interest in holding cryptocurrencies.

In the commodities market, oil prices increased slightly following the Fed's decision, while gold prices faced declines due to the stronger dollar.

WallStreet, FederalReserve, InterestRates