New York
CNN
—
The Dow plunged Wednesday on a disappointing outlook from the Federal Reserve. In the process, the blue-chip index extended its losing streak to 10 days — the longest such stretch since Gerald Ford was president.
The Dow Jones Industrial Average ended the day down about 1,123 points, or 2.6%, after the Fed indicated in a policy statement that it is forecasting just two interest rate cuts in 2025, not the previously projected four. The Fed now anticipates inflation will remain stubbornly above its target range for longer than it had initially expected.
The Dow has fallen for 10 days in a row, the first time it has had a losing streak that long since September 20 through October 4, 1974, when the index fell for 11 sessions in a row.
Until Wednesday’s plunge, the Dow had fallen as the broader markets remained strong. The Dow has lost less than 6% in its long losing streak, a relative blip. Other indexes have been at or near record highs, before falling sharply Wednesday. The S&P 500 fell 3% and the Nasdaq Composite index fell 3.6%.
Investors expected the Fed to cut rates by a quarter point Wednesday, which is exactly what the central bank did. But markets tumbled after the Fed’s statement that it is expecting just two rate cuts in 2025 — a signal that monetary conditions will remain tight. Stocks and bonds declined in response to the Fed’s “hawkish cut,” Jay Hatfield, the CEO and CIO at Infrastructure Capital Advisors, said.
On Tuesday, investors priced in a 98% chance the Fed would cut rates at its January meeting. But after Fed Chair Jerome Powell’s press conference wrapped on Wednesday, traders priced in just a 6% chance that the central bank would lower rates at next month’s meeting, according to fed funds futures data.
“The market was underwhelmed by the likely future path of interest rates,” said Chris Zaccarelli, CIO at Northlight Asset Management.
UnitedHealth Group’s 15% decline this month has dragged the Dow, in particular, lower. The insurance giant’s selloff began after the fatal shooting of UnitedHealthcare CEO Brian Thompson. Ironically, UnitedHealth was about 3.3% higher Wednesday.
Nvidia, the US chipmaker that joined the Dow in November, has also dragged the 30-stock index lower. While Nvidia’s stock is up over 180% this year, it has fallen in the past month, down about 5% and contributing to the Dow’s decline.
Despite the long slide, the Dow remains 14% higher this year, up more than 5,000 points in 2024.
Markets initially surged following the election results, with investors breathing a sigh of relief that recounts and court fights were avoided. There has also been significant enthusiasm for Trump’s promises to cut red tape and taxes.
This is a developing story and will be updated.
