US Stocks Tumble on Fewer Rate Cut Expectations

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Finance Nouvelles

Federal Reserve,Interest Rates,Stock Market

U.S. stocks experienced significant declines after the Federal Reserve indicated a possibility of fewer interest rate cuts in 2025 than previously anticipated. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all dropped sharply, with the Fed's projections revealing only two rate cuts next year compared to the previously expected four.

Specialist Meric Greenbaum works on the floor of the New York Stock Exchange as the rate decision of the Federal Reserve is announced, Wednesday, Dec. 18, 2024.NEW YORK — U.S. stocks sank to their second-worst loss of the year after the Federal Reserve signaled that it may deliver fewer interest rates cuts in 2025 than earlier thought. The S&P 500 dropped 2.9% Wednesday to pull further from its all-time high set a couple weeks ago.

Fed officials released projections on Wednesday showing the median expectation among them is for two more cuts to the federal funds rate in 2025, or half a percentage point’s worth. That’s down from the four cuts expected just three months ago. Powell said some Fed officials, but not all, are also trying to incorporate uncertainties inherent in a new administration coming into the White House. Worries are rising along Wall Street that President-elect Donald Trump’s preference for tariffs and other policies could further spur inflation, along with economic growth.

The reduced expectations for 2025 rate cuts sent Treasury yields rising in the bond market, ramping up the pressure on the stock market. Real-estate owners in the S&P 500 fell 3.6%, for example, for one of the largest losses among the 11 sectors that make up the index. On the winning end of Wall Street, Jabil jumped 5.3% to help lead the market after reporting stronger profit and revenue for the latest quarter than analysts expected. The electronics company also raised its forecast for revenue for its full fiscal year.

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