Athira Sethu
Kochi, 19 December 2024
US stocks fell sharply Wednesday as all major indexes marked their biggest declines in months, following the Federal Reserve’s decision to lower rates by a quarter of percentage point. However, the central bank’s outlook for the following year, which suggested less speed in rate cuts going forward, disappointed some investors.
The Fed lowered interest rates to between 4.25% and 4.50%. Its economic projections indicate that it intends to cut rates by half a percentage point by the end of 2025, partly because inflation has been slow to decline, and the labor market remains strong.
As a result, major stock indices fell. The Dow Jones lost 1,123 points, or 2.58%; the S&P 500 dropped 178 points, or 2.95%; and the Nasdaq lost 716 points, or 3.56% on Wednesday. The Dow’s loss marked its 10th straight day of declines, its longest losing streak since 1974. The Russell 2000, which tracks smaller companies, also dropped 4.4%, its largest decline since June 2022.
The Dow, despite its losses, remains up 12.3% for the year; the S&P 500 is up 23%, and the Nasdaq is more than 29% higher on hopes of lower interest rates due to strong technology stock performances. Some investors fear, however, that policies advocated by President-elect Donald Trump, such as tariffs, may boost inflation.
The CBOE Volatility Index, which measures uncertainty in the stock market, rose to its highest level since April. U.S. Treasury yields also rose, hitting their highest level since May 2023.
As the year comes to a close, many are watching to see if the Fed will leave rates steady or cut again. Higher interest rates generally make stocks less appealing because they make borrowing more expensive for companies.
