NEW YORK (AP) — U.S. stocks fell on one of their worst days of the year after the Federal Reserve indicated Wednesday that the Adrenaline release may be reduced The U.S. economy in 2025 is better than previously expected.
The S&P 500 fell 2.9%, just shy of its biggest decline this year, and stocks fell further. Best ever I set it up a few weeks ago. The Dow Jones Industrial Average fell 1,123 points, or 2.6%, and the Nasdaq Composite Index fell 3.6%.
The Federal Reserve announced Wednesday it would cut its key interest rate for the third time this year, continuing the sharp recovery that began in September when it began cutting rates. lower interest rates From the height of 20 years job market. Wall Street favors easing interest rates, but a rate cut was already widely expected.
The bigger question centers on how much more the Fed will cut rates next year. There’s a lot riding on that, especially after the US stock market hit 57 all-time highs through 2024 on expectations for a series of interest rate cuts in 2025.
Fed officials announced Wednesday that their median forecast is for two more cuts, or 0.5 percentage points, in the federal funds rate in 2025. This is lower than the four cuts expected just three months ago.
“We are at a new stage in the process,” Fed Chairman Jerome Powell said. Since September, the central bank has already swiftly and completely lowered its main interest rate to a range of 4.25% to 4.50%.
When asked why Fed officials are slowing the pace of rate cuts, Powell pointed to the generally strong job market and recent developments. inflation The measurements have gone up. He also said uncertainty requires policymakers to respond to upcoming economic changes.
While lowering interest rates can disrupt the economy by making borrowing cheaper and pushing up investment prices, it can also encourage more inflation.
Powell said some, but not all, Fed officials are already trying to factor in the uncertainty inherent in a new administration entering the White House. There are growing concerns on Wall Street that: President-elect Donald Trump Tariffs and other policy priorities could further fuel inflation along with economic growth.
“When the path is uncertain, you move a little slower,” Powell said. It’s no different than driving a car on a foggy night or walking into a dark room full of furniture. Just slow down. ”
One official, Cleveland Fed President Beth Hammack, believes the central bank shouldn’t even have cut rates this time. She was the only vote against Wednesday’s rate cut.
In the bond market, U.S. Treasury yields rose as expectations for interest rate cuts in 2025 receded, putting pressure on the stock market.
The yield on the 10-year U.S. Treasury rose to 4.51% from 4.40% late Tuesday, a notable move for the bond market. The yield on the two-year Treasury note, which more accurately reflects expectations for Fed action, rose to 4.35% from 4.25%.
On Wall Street, stocks of companies most likely to be under pressure from rising interest rates suffered some of the worst losses.
For example, stock prices of small and medium-sized enterprises were particularly weak. Many people need borrowing to fuel growth. This means you could feel more pain if you have to pay higher interest rates on your loan. The small-cap Russell 2000 index fell 4.4%.
Elsewhere on Wall Street, General Mills fell 3.1% despite reporting better-than-expected earnings for its latest quarter. The maker of Progresso Soup and Cheerios said it would increase investment in its brands to support their growth, and lowered its profit forecast for the current period.
Nvidia, superstar stocks The stock, which was a big part of Wall Street’s record rally in recent years, fell 1.1%, continuing a weeks-long funk. It is down more than 13% from the record set last month and has fallen in nine of the past 10 days, with significant momentum slowing.
The stock market is in wait-and-see mode. More from Seth Stell of The Associated Press.
Wall Street winner Jabiru soared 7.3% to lead the market after reporting its latest quarter’s profit and revenue were stronger than analysts expected. The company also raised its full-year revenue forecast.
Overall, the S&P 500 fell 178.45 points to 5,872.16. The Dow Jones Industrial Average fell $1,123.03 to 42,326.87, and the Nasdaq Composite Index fell $716.37 to 19,392.69.
In overseas stock markets, London’s FTSE 100 index rose less than 0.1% after data showed. Inflation accelerates to 2.6% It was the highest level in eight months for November. The Bank of England is also holding a meeting on interest rates this week and is expected to announce a decision on Thursday.
In Japan, the Nikkei Stock Average fell 0.7% as the Bank of Japan was scheduled to conclude its policy meeting on Friday. Despite the 23.7% increase, it Nissan Motor Co., Ltd. Honda announced that it is in talks to work closely with Honda, but has not yet decided on a possible merger. Honda’s stock price fell 3%.
Nissan Motor Co., Ltd., Honda and Nissan Alliance member Mitsubishi Motors Corporation in August agreed to share electric vehicle components such as batteries and jointly research self-driving software that better adapts to dramatic changes in the auto industry.
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Associated Press writer Zimo Zhong contributed.
