U.S. stocks plunged on Wednesday following the Federal Reserve’s interest rate cut and a revised forecast indicating fewer rate cuts in 2025. All three major indices ended the day sharply lower, with the Dow dropping 2.6%, or more than 1,100 points, to close at 42,326.87. The S&P 500 fell 3.0% to 5,872.16, while the Nasdaq Composite saw a steeper decline of 3.6%, finishing at 19,392.69.
The Federal Reserve’s decision to lower interest rates by a quarter point was widely anticipated, but the accompanying reduction in the number of projected rate cuts for 2025 caught the market by surprise. The Fed now expects just two rate cuts next year, down from an earlier projection of four.
Sam Stovall of CFRA Research pointed out that the sharp market decline reflects investor surprise at the Fed’s revised outlook, suggesting that Wall Street is grappling with the possibility of higher interest rates remaining for an extended period.
Despite the rate cut, Fed Chairman Jerome Powell emphasized that the central bank is nearing the point where no further cuts will be necessary, with the 2% inflation target still a long-term priority. However, recent data has shown inflation moving away from this target, contributing to investor unease.
The market’s reaction was widespread, with 29 of the 30 Dow companies closing in the red and all 11 sectors in the S&P 500 experiencing losses. With many traders taking profits, the severity of Wednesday’s sell-off has raised concerns that further declines may follow in the coming days.
