(Bloomberg) — U.S. markets were rattled Wednesday after the Federal Reserve forecast fewer interest rate cuts next year, pushing stocks lower and Treasury yields higher. It was the worst loss for the S&P 500 on the day of a rate decision since 2001.
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The S&P 500 fell below the 6,000 level, suffering its worst session since August. The tech-heavy Nasdaq 100 fell 3.6%, the most in five months. Micron Technology Inc. Postmarket fell after reporting earnings.
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The policy-sensitive two-year US Treasury yield rose 10 basis points to 4.35% and the 10-year rate rose to levels last seen in May. Bloomberg’s dollar gauge hit its highest level since November 2022.
While Jerome Powell made a widely expected quarter-point rate cut after a meeting of the Federal Open Market Committee, the central bank signaled increased vigilance around inflation, including a reduction that members would expect to see in 2025. How far do you expect to go? Powell reiterated that the central bank will be more cautious as it considers further adjustments to the policy rate and said the Fed remains committed to reaching its 2% target.
“We need to see progress on inflation,” Powell said. “That’s how we’re thinking about it. This is kind of a novelty. We moved fast to get here but we are slowing down as we go.
The pace of Wednesday’s decline is consistent with the speed with which the Fed has returned to an inflationary stance. Ahead of the latest session, the S&P 500 gained more than 10% after the FOMC’s July 31 rate decision, on which the central bank abandoned its one-sided risk assessment and said that expanding the labor market was a major has become a priority.
In Wednesday’s briefing, the chair also said some policymakers have begun to factor into their forecasts the potential impact of higher tariffs that President-elect Donald Trump might impose. But he said the impact of such policy proposals was too uncertain at the moment.
Max Gochman, senior vice president at Franklin Templeton Investment Solutions, called Powell “a hawk in pigeon’s clothing.”
“Despite downplaying the recent slowdown in disability while bragging about the strength of economic momentum, he still indicated that tariffs would not be written off as temporary and that the two-cut forecast for 2025 was necessary as policy remained restrictive. should,” he said. said
The last time the S&P 500 saw a big loss on the day of a Fed decision was September 17, 2001, when the index fell nearly 5%. It fell 12% on March 16, 2020, a day after the Federal Reserve’s emergency weekend meeting amid the pandemic.
