NEW YORK (AP) — U.S. stocks tumbled significantly on Wednesday after the Federal Reserve hinted at a reduction in the pace of interest rate cuts for 2025. The S&P 500 fell by 2.9%, nearing its worst single-day loss of the year, while the Dow Jones Industrial Average lost 1,123 points or 2.6%, and the Nasdaq composite dropped 3.6%.
The Fed, which recently cut its main interest rate for the third time this year, indicated that it would likely deliver only two more cuts in 2025, down from four previously expected. This uncertainty regarding future monetary policy has raised concerns among investors, who saw earlier projections support a series of optimistic market rallies.
Fed Chair Jerome Powell remarked, “We are in a new phase of the process,” referring to the potential changes in the labor market and inflation rates. He also noted that the job market appears robust overall, which influenced the Fed’s decision to slow the pace of rate cuts.
Powell further explained, “When the path is uncertain, you go a little slower,” illustrating the careful approach that policymakers must adopt in light of upcoming economic changes.
The reaction on Wall Street was swift. Stocks of companies sensitive to interest rate fluctuations saw some of the largest declines. Smaller companies, in particular, were affected, with the Russell 2000 index dropping 4.4%. For instance, well-known firms like General Mills and Nvidia also experienced decreases, despite Nvidia’s previous strong performance.
In the broader global context, other stock markets reacted similarly, with Asian markets dipping in response to the Fed’s statements. As a result, the expectation of continued market volatility looms as foreign institutional investors begin to offload U.S. equities.
In summary, the sharp decline of U.S. stocks reflects growing uncertainty surrounding monetary policy and its impact on investor sentiment. How this will affect the market in the coming days remains to be seen, with many analysts urging caution amidst these developments.
