U.S. stocks plunged Wednesday after the Federal Reserve cut interest rates by a quarter of a percentage point and the central bank’s economic projections indicated a slowing in the pace of cuts next year.
According to preliminary data, the S&P 500 lost 2.96%, the Nasdaq Composite lost 3.62% and the Dow Jones Industrial Average lost 2.61%. The Dow Jones suffered its tenth consecutive session of decline, marking its longest streak of daily losses since an 11-session skid in October 1974.
COMMENTS:
JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND
“The Fed played the role of Grinch today, resuming two rate cuts in 2025. Markets tend to overprice rate cuts, causing sharp declines at the slightest hint of a policy change. The irony is that the Fed is much more likely to go further in its policy action in 2025 than it expects, given the direction the labor market is heading.”
JEFF BUCHBINDER, CHIEF EQUITY STRATEGIST, LPL FINANCIAL, BOSTON
“In our outlook for 2025, a few weeks ago, tight positions and sentiments left stocks vulnerable to a collapse. The sharp rise in inflation expectations and the resulting fall in bonds was a convenient excuse. Once technology support evaporated, no other group was able to step in to fill this gaping hole.”
GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIE
“The markets were looking for a point plot that matched what we got. We had two and a half cuts for (2025) this morning, and we have a forecast that calls for about two cuts for (2025) , so it’s roughly in line. But it’s mainly the distortion of the inflation outlook in the summary of economic projections and the confidence in inflation, also included in the summary of economic projections, that was a bit surprising. “.
“The central tendency range of core PCE inflation has not only increased, but also shifted to the right. So although there is now a median of 2.5% for 2025 “The range expected by Fed policymakers is 2.5% to 2.7%, which represents much higher inflation in 2025 than in previous projections, and is therefore the most important change.”
CHRISTOPHER HODGE, AMERICAN CHIEF ECONOMIST, NATIXIS, NEW YORK
“The more hawkish SEP shows that the Fed is serious about tackling inflation and the wide variability in how Trump might implement his policy will only complicate matters. We still think progress “Disinflationary pressures will continue, but it makes perfect sense for the Fed to slow the pace of cuts in order to better assess how Trump’s policies interact with underlying economic dynamics.”
