Markets tumble as cautious Fed signals fewer rate cuts; Dow posts longest losing streak since 1974
On Wednesday, the Dow Jones Industrial Average recorded its 10th straight loss, marking its longest losing streak since 1974, as reported by CNBC.
The index fell by 1,123.03 points, or 2.58 percent, to close at 42,326.87. This decline represented its worst single-day drop since August and the second time it lost over 1,000 points in a session this year.
The S&P 500 decreased by 2.95 percent to 5,872.16, while the Nasdaq Composite dropped 3.56 percent to 19,392.69, with losses accelerating toward the market close.
The Federal Reserve announced a quarter-point cut to its overnight borrowing rate, setting it at a target range of 4.25 to 4.5 percent.
While the cut aligned with market expectations, the Fed’s projection of only two rate cuts in 2025—fewer than the previously forecast four—triggered investor concerns.
Fed Chair Jerome Powell stated, “The central bank’s move to cut rates in recent months allows it to ‘be more cautious as we consider more adjustments to our policy rate.’”
Before the Fed’s announcement, traders had anticipated a more aggressive rate-cutting stance in 2025 to further fuel the bull market. However, Treasury yields rose following the Fed’s cautious outlook, with the 10-year Treasury yield surpassing 4.50 percent.
Jeffrey Gundlach, CEO of DoubleLine Capital, stated on CNBC’s Closing Bell, “Risk assets and a very highly valued stock market doesn’t like the idea that rate cuts are less likely on both sides of the mandate.”
He also mentioned that his takeaway from the press conference was the absence of an aggressive cutting cycle and noted that the market largely aligns with this perspective.
The Dow’s current losing streak began after it closed above 45,000 for the first time on December 4. Over the 10 sessions, the index has lost 6 percent of its value.
David Russell, global head of market strategy at TradeStation, commented, “Good-bye punch bowl. No Christmas cheer from the Fed.”
He noted that US policymakers expect higher inflation and lower unemployment in 2024, leaving no reason for a dovish stance. Russell also observed that with rates no longer clearly restrictive, it is a logical time to pause.
Wednesday’s decline shook the broader market, with the S&P 500 experiencing its worst drop since August. This cut its year-to-date gain to 23 percent.
The Dow’s earlier struggles stemmed mainly from a rotation out of old economy stocks into technology shares, a sector underrepresented in the index compared to broader market measures.
