WASHINGTON (dpa-AFX) - Stocks saw modest strength early in the session on Wednesday but plummeted in reaction to the Federal Reserve's monetary policy announcement. The major averages all moved sharply lower on the day, with the Dow extending its losing streak to ten straight sessions.
The major averages finished the day near their lows of the session. The Dow plummeted 1,123.03 points or 2.6 percent to 42,326.87, the Nasdaq dove 716.37 points or 3.6 percent to 19,392.69 and the S&P 500 plunged 178.45 points or 3.0 percent to 5,872.16.
With the steep drop on the day, Dow saw its longest losing streak since 1974, tumbling to its lowest closing level in over a month. The broader S&P 500 also slumped to a one-month closing low.
The sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year.
The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent, matching the rate cut seen in early November.
With the rate cut almost universally expected, the focus of the announcement was on Fed officials' latest economic projections.
The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September.
Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.
The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 percent compared to the 2.1 percent forecast in September.
During his post-meeting press conference, Fed Chair Jerome Powell said the central bank will be looking for additional progress on inflation before considering further rate cuts, noting annual price growth has recently been moving sideways.
Notably, the decision to lower rates at this meeting was not unanimous, as Cleveland Fed President Beth M. Hammack preferred to leave rates unchanged.
The Fed's next monetary policy meeting is scheduled for January 28-29, with CME Group's FedWatch Tool currently indicating a 90.3 percent chance the central bank will leave rates unchanged.
Sector News
Gold stocks moved sharply lower as the price of the precious metal plummeted in after hours trading, dragging the NYSE Arca Gold Bugs Index down by 4.6 percent to its lowest closing level in over four months.
Substantial weakness also emerged among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index plunging by 4.3 percent and 4.2 percent, respectively.
Interest rate-sensitive commercial real estate stocks also saw considerable weakness, resulting in a 4.0 percent nosedive by the Dow Jones U.S. Real Estate Index.
Software, housing, semiconductor and steel stocks also showed significant moves to the downside amid broad based weakness on Wall Street.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. While Japan's Nikkei 225 Index slumped by 0.7 percent, China's Shanghai Composite Index climbed by 0.6 percent.
Meanwhile, European stocks saw modest strength on the day. The French CAC 40 Index rose by 0.3 percent and the U.K.'s FTSE 100 Index inched up by 0.1 percent, although the German DAX Index closed just below the unchanged line.
In the bond market, treasuries moved sharply lower in reaction to the Fed's revised rate cut forecast. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 10.9 basis points to 4.494 percent.
Looking Ahead
Trading on Thursday may continue to be impacted by reaction to the Fed announcement, although traders are also likely to keep an eye on reports on weekly jobless claims and existing home sales.
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