The stock market faced significant turmoil on Wednesday following the Federal Reserve’s latest economic outlook and signals of future rate cuts. This led to a widespread sell-off across key indices. The Dow Jones Industrial Average plunged more than 1,100 points, marking a steep 2.6% drop.
It extended its losing streak to ten consecutive sessions, the longest since 1974. The S&P 500 index fell 2.95%, breaking below its 50-day moving average. The Nasdaq composite declined 3.6%, posting its worst daily loss on a Federal Reserve decision day since March 2001.
The small-cap Russell 2000 index plummeted 4.4%, erasing all post-election gains. Micron Technology saw a substantial decline in after-hours trading, diving more than 10% after issuing weak guidance for the next quarter. Despite reporting revenue in line with expectations for its fiscal first quarter, Micron’s outlook on earnings, revenue, and gross margins for fiscal Q2 fell short of consensus estimates.
The stock had already dropped 4.3% to 103.90 during regular trading hours on Wednesday. The Federal Reserve’s decision to cut interest rates by a quarter point on Wednesday was largely anticipated. This culminated in a cumulative reduction of 100 basis points over the last three meetings of 2024.
However, the central bank’s dot-plot projection indicated two more rate cuts in 2025, with only modest economic growth expected. Fed Chairman Jerome Powell expressed optimism about the economy but highlighted the policy uncertainties under President-elect Donald Trump’s administration.
Market turmoil after Fed’s rate cuts
These uncertainties could influence future rate cut decisions. Adding to the market’s unease, Treasury yields spiked sharply. The 10-year Treasury yield rose 11 basis points to 4.49%, reaching the highest levels since the end of May.
Tesla, amongst the most notable movers, skidded 8.3% to 440.13 but remained above its short-term moving averages. The electric vehicle giant has been performing robustly of late, still trading 41% above its 50-day moving average. Nvidia also suffered losses, falling 1.1% to 128.91 after briefly rising to 136.70.
The stock has been declining for five consecutive sessions, bringing it well below its 50-day moving average and to a two-month low. In broader market movements, the Invesco S&P 500 Equal Weight ETF dropped 3% to a three-month low. The First Trust Nasdaq 100 Equal Weighted Index ETF fell 3.7%.
Among other sectors, the SPDR S&P Metals & Mining ETF shed 3.95%, while the Energy Select SPDR ETF gave up 2.8%. U.S. crude oil prices rose slightly by 0.7% to $70.58 a barrel. Bitcoin tumbled 5.7% to 100,636 as of 4 p.m. ET.
Investors are urged to remain cautious and consider reducing exposure if specific positions and recent buys are not performing as expected. With the market signaling potential character changes, paying close attention to the current market dynamics is essential.
