Stocks are reeling after the Fed signaled it would slow its easing measures

(Reuters) – U.S. stocks slumped on Wednesday after the Federal Reserve cut interest rates by a quarter of a percentage point and the central bank’s economic forecasts signaled a slower pace of rate 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 2.61%. The Dow Jones suffered its 10th straight decline, marking its longest daily losing streak since an 11-day slide in October 1974.

COMMENTS:

JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND

“The Fed played the role of the Grinch today, rolling back two rate cuts in 2025. Markets tend to overstate interest rate cuts in the markets, leading to sharp pullbacks when even the slightest hint of a policy change occurs. The irony is that the Fed is far more likely to advance policy in 2025 than it expects, given where the labor market is headed.”

JEFF BUCHBINDER, CHIEF EQUITY STRATEGIST, LPL FINANCIAL, BOSTON

“In our 2025 outlook a few weeks ago, stretched positioning and sentiment left stocks vulnerable to a sell-off. The sharp rise in inflation expectations and the associated bond sell-off provided a convenient excuse. Once support from the tech industry evaporated, no other groups could step in to fill this gaping hole.

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

“The markets were looking for a ‘scatter chart’ consistent with what we got. As of this morning, (2025) cuts of about two and a half were priced in, and we’re getting a forecast that calls for (2025) cuts of about two and a half, so that’s about in line. But it was really the distortion of the inflation outlook in the summary of economic forecasts and the confidence in inflation also contained in the summary of economic forecasts that was somewhat surprising.”

“The central trend area of ​​core PCE inflation not only increased, but also trended to the right. Although there is currently a median of 2.5% for 2025, the range that Fed policymakers expect is 2.5% to 2.7%, so that is much higher inflation in 2025 than we are expecting previous forecasts had, 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 fighting inflation, and the big differences in how Trump might implement his policies will only complicate things.” We still expect disinflationary progress to continue will, but it only makes sense for the Fed to slow 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)