Stocks dive after Fed cuts rates, signals slower easing pace in 2025
Wed December 18, 2024 5:00 PM
Yesterday it was noted that investors had some trepidation about the so-called SEP Fed report projecting economic conditions for the coming year and its impact on rate cuts. They didn’t get what they wanted. Despite the ¼ December cut coming through, the market was shocked and sent into a tailspin right at 2 pm (when Powell likely made the announcement) that the SEP indicated a need to slow down the cuts and that only two more would be coming in 2025. The indexes saw their biggest daily drop in months, especially with the Dow plummeting more than 1,100 points and its 10th straight day of declines, something that hasn’t happened since 1974.
This was a big shock despite Powell having held the position for quite some time that cuts would always be data-dependent and the Fed might be slowing down the cuts. Everyone was shocked that is except today’s expert who said, “If you look at all the changes to the SEP, they really had no choice. It’s very clear that the economy is running a lot hotter than their previous projection. And that has got to contribute to their desire to potentially pause.” The VIX in one day has skyrocketed from yesterday’s 15 to 27.6, pretty close to the benchmark 30 where the markets start getting nervous about recession. But the good news remains that the S&P is up 23%, the Nasdaq 29% and even the Dow has risen 12% this year. Volume was huge at 18.6 billion, way above the 4-week average of 14.36 billion.
DJ: 43,449.90 -267.58 NAS: 20,109.06
-64.83 S&P: 6,050.61
-23.47 12/17
DJ: 42,326.87 -1,123.03 NAS: 19,392.69 -716.37 S&P: 5,872.16
-178.45 12/18
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