Stocks skid after Fed signals it will slow down its easing
(Reuters) – U.S. stocks plunged on Wednesday after the Federal Reserve cut interest rates by a quarter of a percentage point and the central bank’s economic projections signaled a slower pace of cuts next year.
According to preliminary data, the S&P 500 lost 2.96%, while the Nasdaq Composite lost 3.62% and the Dow Jones Industrial Average fell or 2.61%. The Dow suffered its 10th straight session of declines, to mark its longest daily streak of losses since an 11 session skid in October 1974.
COMMENTS:
JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND
“The Fed played the role of Grinch today—taking back two rate cuts in 2025. Markets tend to overprice rate cuts into markets, causing sharp pull backs when even the slightest hint of a change in policy occurs. The irony is that the Fed is far more likely to go further with policy action in 2025 than it expects, given where the labor market is headed.“
JEFF BUCHBINDER, CHIEF EQUITY STRATEGIST, LPL FINANCIAL, BOSTON
“Our 2025 Outlook a couple of weeks ago, stretched positioning and sentiment left stocks vulnerable to a selloff. The big jump in inflation expectations and related bond selloff was a convenient excuse. Once support from Tech evaporated, no other groups were able to step in to fill that gaping hole.”
GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA
“Markets were looking for a ‘dot plot’ that was in range with what we got. We had two and a half-ish cuts priced into (2025) as of this morning, and we get a forecast which has two-ish cuts for (2025), so that’s about in line. But it was really the skew of the summary of economic projections inflation outlook, and the confidence on inflation, also included in the summary of economic projections, that were a bit surprising.”
“The core PCE inflation central tendency range not only went up but skewed to the right. So, although there’s a median of 2.5% now for 2025, the range that the Fed policy makers expect is 2.5% to 2.7%, so that’s a lot higher inflation in 2025 than we had in prior projections, and so that’s the biggest change.”
CHRISTOPHER HODGE, CHIEF US ECONOMIST, NATIXIS, NEW YORK
“The more hawkish SEP shows that the Fed is serious about tackling inflation and the wide variance of how Trump could implement policy will only complicate things. We still think disinflationary progress will continue, but it only makes sense for the Fed to slow down the pace of cuts to better assess how Trump’s policies interact with underlying economic dynamics. “
