Stocks slide after Fed signals it will slow easing

On December 19, 2024By Littum

(Reuters) – U.S. stocks fell 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 decline, to mark its longest daily losing streak since an 11-session skid in October 1974. The Dow and S&P saw their biggest one-day percentage declines since August 5, and the Nasdaq saw its biggest daily decline . decrease since July 24. The small-cap Russell 2000 fell 4.4%, the biggest drop since June 16, 2022.

COMMENTS:

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER AT DAKOTA WEALTH IN FAIRFIELD, CONNECTICUT

“It’s kind of surprising the way the market reacted, it’s a lot of selling on the news. Did it, as Powell said, make it worse? I don’t think it helped, so what I saw was some selling pressure increasing to more selling pressure, and then develops into a day with 1100 points down.”

“I don’t think it’s logical, everything that happened since the action by the Fed was pretty much expected. You got a cut and you have a Fed that’s on hold.”

“The question I’ve been asked is, is this going to last? It’s going to last until tomorrow, but then you have to decide how much pressure is coming in. Is it just the reaction, the selling pressure, or is it pulling people locking in .profits that may have waited until early 2025 before selling. If it’s the latter, then you need to wait for some kind of consolidation before you step in and you’ll be able to see if it’s one or the other. the volume and the size of the movements.”

“Tomorrow I expect the market to open lower and around 10 o’clock I hope to see some buying interest. If that doesn’t develop the market will continue to sell off and then somewhere around lunchtime they will try to see if the market may stabilize. If (there isn’t) enough buying interest, stocks will continue to move lower.”

CAROL SCHLEIF, CHIEF MARKET STRATEGIST, BMO PRIVATE WEALTH, MINNEAPOLIS

“I’m a little surprised that the markets are so surprised by the Fed conference. I think traders were hoping that the Fed would not focus so much on the sticky inflation side. Chairman Powell also noted on several occasions how strong the economy remains , especially in relation to the rest of the world.”

JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND

“The Fed played the part of the Grinch today – by taking back two rate cuts in 2025. Markets tend to overprice rate cuts in the markets, causing sharp pullbacks 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

“A few weeks ago, our 2025 outlook, stretched positioning and sentiment left stocks vulnerable to a sell-off. The big jump in inflation expectations and related bond selling was a convenient excuse. With support from Tech gone, no other groups were able to step in. to fill the gaping hole.”

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA

“The markets were looking for a ‘dot plot’ that was consistent with what we got. We had two and a half cuts priced into (2025) as of this morning and we’re getting a forecast that has two and a half cuts for (2025 ), so it’s roughly in line. But that was really the bias in the summary of economic projections, the inflation outlook, and the confidence in inflation, which is also included in the summary of economic projections that were a bit surprising.”

“The core PCE inflation trend range not only went up, but also skewed to the right. So while there is a median of 2.5% now for 2025, the range that Fed policymakers expect is 2.5% to 2.7 %, so that’s much higher inflation in 2025 than we had in previous projections, and so that’s the biggest change.”

CHRISTOPHER HODGE, CHIEF US ECONOMIST, NATIXIS, NEW YORK

“The more hawkish SEP shows the Fed is serious about tackling inflation, and the wide variety in how Trump could implement policy will only complicate matters. We still think disinflationary progress will continue, but that 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.”

(Compiled by the Global Finance & Markets Breaking News team)