Financial markets experienced a significant downturn Wednesday as the Federal Reserve’s latest projections sparked a massive selloff. The Dow Jones Industrial Average recorded a historic decline of approximately 1,123 points, marking a 2.6% drop and extending its losing streak to 10 consecutive trading days – a pattern not seen since the Ford administration in 1974.
The catalyst for this market upheaval was the Fed’s revised outlook on interest rate cuts. The central bank now projects only two rate reductions in 2025, half of what was previously anticipated, citing persistent inflation concerns above their target range.
While the Fed delivered the expected quarter-point rate cut, investors reacted strongly to the more conservative outlook for future monetary policy. Market sentiment shifted dramatically regarding the likelihood of a January rate cut, plummeting from 98% certainty on Tuesday to just 6% after Fed Chair Powell’s press conference.
The market decline extended beyond the Dow, with the S&P 500 dropping 3% and the Nasdaq Composite falling 3.6%. Despite this extended downturn, the Dow’s cumulative losses during the streak have been relatively modest at less than 6%, with the index still maintaining a 14% gain for the year.
Notable contributors to the Dow’s recent performance include UnitedHealth Group, which has seen a 15% decline this month following tragic events involving its healthcare division’s CEO. Additionally, recent Dow addition Nvidia, despite its impressive 180% gain this year, has experienced a 5% decline over the past month.
The broader market reaction reflects growing concern about the prolonged high-interest-rate environment, with investors adjusting their expectations for monetary policy easing. As Infrastructure Capital Advisors’ CEO Jay Hatfield noted, both stocks and bonds retreated in response to what market observers termed a “hawkish cut.”
