Stocks ended lower Wednesday, with the Dow marking its 10th straight losing day, as investors reacted to the final Federal Reserve rate decision of the year.
The Dow Jones Industrial Average tumbled 1,123.03 points, or 2.58%, to end the session at 42,326.87, the index's worst losing streak since an 11-day slide in 1974.
The S&P 500 dropped 2.95% to close 5,872.16 and the tech-heavy Nasdaq gave up 3.56% to end the day 19,392.69.
Charlie Ripley, senior investment strategist for Allianz Investment Management, said that the main takeaway the Fed meeting was that inflation risks are back, and the Fed is clearly concerned.
"The Fed has been able to maneuver 100 basis points of cuts so far in this cycle but given the trajectory of the economy and the recent uptick of inflation, it is going to be more difficult for the Fed to provide basis to continue cutting rates at the same pace," he said.
Ripley said that the other reality is that "Fed Chair Jerome Powell and company cannot afford to be wrong on inflation again as upside risks continue to persist."
"Therefore, we see the bar being raised for rate cuts going forward from here and given this Fed is operating on a data-dependent level, any meaningful upticks of inflation raise the risk that additional rate cuts, if any, will be few and far between," he said.
Updated at 3:13 PM EST
Bond bears
Big moves in the bond market as Fed Chairman Powell speaks to the media, with 10-year note yields rising 10 basis points to 4.491% and 2-year notes jumped 18 basis points from the Fed decision to 4.382%.
"As we think about further cuts, we're going to be looking for progress on inflation," Powell told reporters in Washington. "We have been moving sideways on 12-month inflation"
"As we go forward, we're going to want to be seeing further progress on bringing inflation down, and keeping a solid labor market," he added.
When the 10-year Treasury yield ($TNX) surpasses 4.5%, it could signal significant market movements. Higher yields tend to tighten financial conditions, potentially impacting equities, bonds, and even global markets as borrowing costs rise and investor sentiment shifts. pic.twitter.com/7TRSYnoFl9
— Naeem Aslam (@NaeemAslam23) December 18, 2024
Updated at 2:53 PM EST
S&P 500 6,000
Stocks are extending their post-decision declines amid some further hawkish commentary from Fed Chairman Jerome Powell in his regular press briefing in Washington.
The S&P 500 was last marked 66 points lower, or 1.1%, dragging the benchmark back below the 6,000 point mark.
The Nasdaq fell 250 points, or 1.25% while the Dow fell another 400 points to extend its longest losing streak since 1978.
The U.S. dollar index, meanwhile, spiked 0.96% to 108.011, the highest in around 2 years.
Rising chance of a hike next year @kalshi https://t.co/dlQs67Wk39 pic.twitter.com/OUA4Rxhzsa
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) December 18, 2024
Updated at 2:15 PM EST
Hawkish cut
The Fed, as expected, lowered its benchmark lending rate by a quarter of a percentage point, to 4.375%, but trimmed projections for follow-on cuts in 2025 amid stick inflation pressures and a resilient domestic economy.
The Fed's new Summary of Economic Projections suggest and end-2025 Fed Funds rate of 3.9%, suggesting two rate cuts over the whole of the year, amid what the Fed called "somewhat elevated" inflation.
U.S. stocks pared earlier gains following the Fed statement, with the S&P 500 last marked 26 points, or 0.4%, lower on the session. The tech-focused Nasdaq, meanwhile, fell 90 points, or 0.45%, while the Dow was last marked 65 points to the downside.
Benchmark 10-year Treasury note yields rose 4 basis points to 4.434% while 2-year notes added 10 basis points to change hands at 4.308%.
The U.S. dollar index surged 0.69% higher to 107.690.
"While we've entered a period of anticipated Fed rate reductions, we now expect fewer than projected cuts next year," said Selma Hepp, chief economist at CoreLogic.
"The economy remains strong, and the job market is solid, thus there are still many reasons for the Fed to be cautious about cutting interest rates," she added. "In turn, despite the prospect of deportations and tariffs being discussed today, we won't know the full impact until such measures are implemented."
JUST IN: The Federal Reserve cut interest rates (as expected) by a quarter point to 4.25 to 4.5%.
— Heather Long (@byHeatherLong) December 18, 2024
1 person voted against the cut.
***The big news is the Fed projects higher inflation in 2025 and only 2 interest rate cuts next year*** pic.twitter.com/mzsRh3Z6ea
Updated at 10:47 AM EST
Nvidia bounce
Nvidia shares jumped out of correction territory in early trading, rising 4.1% to a week-to-date high of $135.90 each, following a bullish near-term outlook on the AI marketplace from Citigroup analyst Atif Malik.
Malik, who reiterated his 'buy' rating and $175 price target, suggested Nvidia could capture as much as 75% of a market that is expected to rise to $380 billion over the next three years.
Related: Top analyst revisits Nvidia stock price target after correction slump
Updated at 9:34 AM EST
Mixed open
The S&P 500 was marked 3 points, or 0.05% lower in the opening minutes of trading, withe the Nasdaq slipping 30 points, or 0.15%.
The Dow edged 95 points higher while the mid-cap Russell 2000 gained 12 points, or 0.51%.
S&P 500 Opening Bell Heatmap (Dec 18, 2024)$SPY -0.06% 🟥$QQQ -0.21% 🟥$DJI +0.13%🟩$IWM +0.50% 🟩 pic.twitter.com/3HKnudH2qc
— Wall St Engine (@wallstengine) December 18, 2024
Updated at 9:07 AM EST
General decline
General Mills (GIS) shares are set to open at the lowest level in a month after the cereal maker slashed its full-year profit forecast following an otherwise solid second quarter earnings report.
The Cheerios maker said full-year profits will likely decline between 1% and 3%, compared to its prior forecast of a breakeven year, as it ramps up promotional spending in order to attract more price-focused customers.
General Mills shares were marked 4.44% lower in premarket trading to indicate an opening bell price of $63.00 each.
General Mills, $GIS, Q2 FY25 Results:
— EarningsTime (@Earnings_Time) December 18, 2024
🔴 -3.14% Pre-Market ($63.86)
📊 Adj EPS: $1.40 🟢
💰 Revenue: $5.24B 🟢
📈 Net Income: $796M
🔍 Operating profit surged 33%, aided by margin improvements and growth in Pet Food & Foodservice. pic.twitter.com/1k0FqSGhII
Updated at 8:37 AM EST
Housing slump
Housing starts extended their slump last month, matching the slowest pace since mid-2020, as the expected rebound in post-hurricane construction continues to be hindered by higher mortgage rates.
The Commerce Department reported November housing starts at an annual rate of 1.289 million, well shy of Wall Street's 1.343 million forecast and the 1.312 million pace recorded in October. Single family starts, however, rose 6.4% from October levels.
The Mortgage Bankers' Association reported earlier this morning that the fixed rate for conforming 30-year loans rose 8 basis points last week to 6.75%.
US 30-year mortgage rates rose to 6.75% for the week ending Dec 13, up from a 7-week low of 6.67%, per MBA. First increase in 4 weeks, following Treasury yields up, with expectations of fewer Fed rate cuts in 2025. pic.twitter.com/GjlDmMecYw
— Jingmeow (@JingMeow_101) December 18, 2024
Stock Market Today
Stocks ended lower across the board on Tuesday, with the Dow Jones Industrial Average extending its daily losing streak to nine, the longest since 1978. The 30-stock average, however, is only around 3.5% from its all-time peak.
Broader U.S. benchmarks are also performing well, even with yesterday's pullback. The S&P 500 is up 5.4% over the fourth quarter and 27.34% for the year amid bets that the Fed will round out the year with a rate cut that will add support to a resilient economy and improving corporate profits.
However, while analysts and rate traders fully expect the Fed to deliver its third consecutive reduction this afternoon — which would take the Federal Funds Rate a full percentage point lower than it was when the central bank began cutting in September — few expect the same amount of easing next year.
The central bank will publish a fresh Summary of Economic Projections report, which will serve as a guide to future rate moves, alongside today's decision. The report, also known as the dot plots, suggested at least four rate cuts over the course of 2025 when it was last published in September.
"The Fed won’t adjust its policy framework mid-cycle," said Lauren Goodwin, economist and chief market strategist at New York Life Investments. "However, as we look to the next few years, a combination of stubborn inflation, capital-intensive global investment needs, and high government debt levels may conspire to influence changes to central bank frameworks over the medium term."
"Looking ahead, core PCE has to average 0.1% and 0.2% month-on-month in order for the Fed to keep making progress toward its target," she added. The personal consumption expenditures price index is the Fed's preferred inflation indicator.
Related: Retail sales surge tests bets on more Fed rate cuts in 2025
Bond markets are largely steady heading into today's Fed decision, following their worst five-day selloff of the year last week. Benchmark 10-year notes are holding at 4.405% and 2-year notes are trading at 4.255%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.03% higher at 106.979.
On Wall Street, stock futures suggest cautious gains to start the trading day, with the S&P 500 called 16 points higher and the Nasdaq priced for a modest 60 point gain. The Dow, meanwhile, is called 110 points higher.
Stocks on the move include Tesla (TSLA) , which was marked 2.6% lower following reports of merger talks between Japanese automakers Nissan and Honda. That combination could challenge Tesla's EV-market share in key economies.
Nvidia (NVDA) shares were also active, rising 2.8% after slumping to a multi-month low last night.
Related: US stocks rule as bull market bets highlight 'American exceptionalism'
In overseas markets, Britain's FTSE 100 was marked 0.24% higher in London after inflation data showed price pressures rising to an eight-month high in November, adding further complexity to the Bank of England's Thursday rate decision.
The regionwide Stoxx 600 benchmark, meanwhile, edged 0.16% higher in Frankfurt.
More Wall Street Analysts:
- Veteran analyst who forecast Rocket Lab's stock rally updates price target
- Analysts revamp Ciena stock price target after AI outlook
- Top analyst revisits Micron stock price target ahead of Q1 earnings
Overnight in Asia, Nissan shares surged the most in five decades, rising 24% on the session, amid the reports of the merger talks with Honda, helping the Nikkei 225 rise 0.72% by the close of trading.
The MSCI ex-Japan index, meanwhile, edged 0.29% higher, powered by gains in South Korea and Hong Kong.
Related: Veteran fund manager delivers alarming S&P 500 forecast
