Fed spoils Christmas party

The merrymaking and the parties on Wall Street turned somber last week as investors digested the Federal Reserve's hawkish surprise.

- WILSON SY

The merrymaking and the parties on Wall Street turned somber last week as investors digested the Federal Reserve’s hawkish surprise. Market sentiment soured, triggering the year’s biggest market rout on Wednesday as policymakers signaled fewer rate cuts next year than anticipated.

The S&P 500 plunged by three percent in its worst decline since August, while the Nasdaq Composite tumbled by 3.6 percent, erasing two weeks of gains. The Dow Jones Industrial Average extended its losing streak to 10 consecutive days – the longest since the 1970s – tumbling by 2.6 percent as investors fled risk assets.

Powell delivered Scrooge

The market wanted Santa, but Powell delivered Scrooge. While the Fed delivered its anticipated quarter-point cut, the surprise came in the dot plot – showing only two rate reductions planned for 2025.

This is a stark downgrade from September’s projection of four. Fourteen of 19 Federal Open Market Committee (FOMC) officials aligned behind this more restrictive outlook, leaving just five members forecasting a deeper easing cycle.

Tech sector leads market decline