Dow Jones plummets as the Federal Reserve signals fewer rate cuts in 2025, impacting the U.S. stock market with significant declines across major indexes.

Dow Jones Stock Market Experiences Sharp Decline Amid Fed’s New Projections

The U.S. stock market experienced one of its most dramatic drops this year, as the Federal Reserve announced fewer-than-expected rate cuts for 2025. The S&P 500 fell 2.9%, the Dow Jones Industrial Average plummeted 1,123 points (2.6%), and the Nasdaq Composite slid 3.6%.

The Federal Reserve’s decision on Wednesday included a widely anticipated third rate cut this year, reducing the federal funds rate to a range of 4.25% to 4.50%. However, the Fed’s updated projections revealed expectations for only two rate cuts in 2025, down from the four cuts predicted earlier.

Powell’s Explanation for Slowing Rate Cuts

Fed Chair Jerome Powell explained that uncertainties in the economy and improving job market performance influenced the cautious approach. Powell likened the situation to “driving on a foggy night” and emphasized the importance of moving slower in unpredictable conditions.

He also pointed to recent inflation upticks and potential economic shifts under a new administration as key factors shaping the decision. Concerns are rising that President-elect Donald Trump’s tariff policies may accelerate inflation while boosting economic growth.

Treasury Yields Rise, Stock Market Reacts

The reduced expectations for rate cuts drove Treasury yields higher. The 10-year Treasury yield climbed to 4.50% from 4.40%, while the two-year Treasury yield increased to 4.35%. This exerted pressure on the stock market, particularly on smaller companies reliant on borrowing, as the Russell 2000 index plunged 4.4%.

Stock Highlights: Winners and Losers

• General Mills dropped 3.1% despite reporting strong quarterly profits, as the company announced increased investments that reduced its profit forecast.
• Nvidia continued its downward trend, losing 1.1% and extending its recent decline to more than 13% from its record high.
• On the positive side, Jabil surged 7.3% after surpassing profit and revenue expectations and raising its fiscal year forecast.

Global Market Reactions

Global markets also showed mixed results:

• London’s FTSE 100 rose marginally after inflation data indicated an eight-month high of 2.6%.
• Japan’s Nikkei 225 slipped 0.7%, despite a 23.7% surge in Nissan Motor Corp. shares following talks of closer collaboration with Honda Motor Co.

Key Figures from the Market:

• S&P 500: Dropped 178.45 points to 5,872.16
• Dow Jones Industrial Average: Fell 1,123.03 points to 42,326.87
• Nasdaq Composite: Skidded 716.37 points to 19,392.69