Major stock indices plunged Wednesday after the Federal Reserve signaled a slower pace of interest-rate cuts for 2025 than previously forecast as it renewed concerns about how fast inflation would fall. The S&P 500 lost 2.4% and the Nasdaq Composite shed nearly 3%, with losses intensifying as markets closed for the day. The Dow Jones Industrial Average tumbled more than 1,100 points for its biggest loss since August.
The Dow's 10th-consecutive down day is now approaching the worst losing streak in 50 years. Though eye-popping, the streak largely reflects a rotation by investors out of more established companies into tech stocks, to which the Dow tends to apply less weight. The Fed indicated it now sees just two reductions to its key federal funds rate next year, after projecting four just a few months ago. It comes as the central bank now believes inflation will continue to remain above its 2% target into 2026. In other words, the Fed is signaling that interest rates will have to remain higher for longer to keep a lid on the pace of price increases. It's bad news for stocks — whose growth tends to get a boost from lower interest rates — but a more mixed picture for the broader economy. Alongside its higher inflation projections, the Fed also indicated the unemployment rate is unlikely to move much beyond its current level of 4.2%, suggesting the labor market will remain relatively stable. 'The Fed appears more comfortable with the trajectory of the U.S. economy relative to a few months ago and tells us the concerns around inflation are back in play for the Fed,' Charlie Ripley, senior investment strategist for Allianz Investment Management, said in commentary emailed to clients Wednesday. The wildcard remains Donald Trump. The President-elect has promised to implement a broad range of tariffs that economists say will likely mean price increase
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