The Dow Jones Industrial Average plunged more than 1,100 points on Wednesday, closing down approximately 2.6%. This sharp decline extends the blue-chip index’s losing streak to 10 days, marking the longest such stretch since 1974 when Gerald Ford was president. The significant drop followed a disappointing outlook from the Federal Reserve.
In its policy statement, the Fed forecasted just two interest rate cuts in 2025, contrary to the previously projected four. The central bank now anticipates that inflation will remain stubbornly above its target range for a longer period than initially expected. Despite the ongoing decline, the Dow has lost less than 6% during this period, a modest drop in the broader context.
The S&P 500 fell 3%, and the Nasdaq Composite Index dropped 3.6%. Investors had anticipated a quarter-point rate cut by the Fed on Wednesday, which the central bank did implement.
Fed disappoints with interest rate forecast
However, markets responded negatively to the Fed’s expectations for future rate cuts, signaling that monetary conditions would remain tight. Jay Hatfield, CEO and CIO at Infrastructure Capital Advisors, noted that stocks and bonds declined in response to the Fed’s “hawkish cut.” Market confidence in a rate cut at the Fed’s January meeting plummeted from 98% to 6% following Fed Chair Jerome Powell’s press conference, based on fed funds futures data. “The market was underwhelmed by the likely future path of interest rates,” said Chris Zaccarelli, CIO at Northlight Asset Management.
Several major stocks contributed to the Dow’s decline. UnitedHealth Group’s 15% drop this month has significantly impacted the index, although the stock saw a 3.3% increase on Wednesday. Nvidia, the US chipmaker that joined the Dow in November, also pulled the index lower.
Despite Nvidia’s stock rising over 180% this year, it has fallen about 5% in the past month. The Dow remains 14% higher for the year, up more than 5,000 points in 2024, despite the long slide. This is a developing story and will be updated as more information becomes available.
