US markets faced significant turbulence on Wednesday as the Federal Reserve’s cautious outlook on interest rates sent shockwaves through equities and bond markets. While the central bank’s widely anticipated quarter-point rate cut aligned with expectations, the forecast for only two rate cuts in 2025 caught investors off guard, sparking a broad sell-off. The Dow Jones Industrial Average marked its 10th consecutive day of losses, a streak unseen since 1974, while the S&P 500 and Nasdaq also saw steep declines. Treasury yields spiked as investors recalibrated expectations, intensifying the pressure on equities and fuelling broader uncertainty across global markets.
- Dow Posts 10th Consecutive Loss, Plunges 1,100 Points: The Dow Jones Industrial Average sank 1,123.03 points, or 2.58%, to close at 42,326.87, marking its worst single-day drop since August and extending its historic 10-day losing streak — the longest since an 11-day slide in 1974. The Dow’s total losses during this streak have reached 6%, erasing much of its gains since hitting a record high on December 4.
- S&P 500 And Nasdaq Record Sharp Declines: The S&P 500 dropped 2.95% to 5,872.16, its worst session since August, cutting its 2024 gains to 23%. The Nasdaq Composite shed 3.56% to 19,392.69, with losses accelerating in the final hours of trading.
- Fed Signals Slower Pace of Rate Cuts: The Federal Reserve reduced its overnight borrowing rate by 0.25 percentage points, setting the target range at 4.25% to 4.5%. However, it signalled a more conservative outlook, planning only two rate cuts in 2025, fewer than the four projected earlier. Chair Jerome Powell highlighted the Fed's intent to move cautiously following recent rate adjustments, emphasising the need to closely monitor economic developments.
- 10-Year Treasury Yield Surges Past 4.5%: Treasury yields rose sharply after the Fed’s announcement, with the benchmark 10-year yield climbing nearly 12 basis points to 4.504%. The 2-year Treasury yield increased over 10 basis points to 4.348%. Higher yields pressured equity markets further, particularly in sectors reliant on lower borrowing costs.
- US Single-Family Housing Starts Rebound: Single-family housing starts in the United States rose 6.4% in November to a seasonally adjusted annual rate of 1.011 million units, recovering from the previous month’s hurricane-driven slowdown. October's data was revised to reflect a drop to 950,000 units. Despite the rebound, concerns about tariffs on imported goods and labour shortages due to potential mass deportations continue to weigh on the housing market's long-term outlook.
- European Markets Edge Higher Despite Global Volatility: European markets showed resilience despite Wall Street’s turmoil, with the pan-European Stoxx 600 closing up 0.16%. In the UK, the FTSE 100 added 0.05% to 8,199.11 following new inflation data showing UK CPI rose to 2.6% in November, in line with expectations, and France’s CAC 40 gained 0.3% to close at 7,385. The FTSE MIB added 0.3%, ending at 34,400. Germany's DAX closed nearly flat, down 0.025%. Eurozone inflation for November was revised down slightly to 2.2% from 2.3%, while construction production rose 1% month-on-month. Renault’s shares jumped 5.2% following reports of merger talks between Nissan and Honda, further boosting sentiment.
- Asian Markets Mixed as Japan Reports Strong Trade Data: Asia-Pacific markets delivered mixed performances on Wednesday. Japan’s Nikkei 225 fell 0.72% to 39,081.71, while the broader Topix slipped 0.31% to 2,719.87. Trade data showed Japan’s exports grew 3.8% year-on-year in November, surpassing expectations of 2.8%, while imports fell 3.8%, significantly below forecasts of a 1% increase. South Korea’s Kospi gained 1.12% to 2,484.43, while China’s CSI 300 rose 0.51% to 3,941.89. Hong Kong’s Hang Seng Index added 0.95% to 19,880. Australia’s S&P/ASX 200 slipped slightly by 0.06% to close at 8,309.4.
- Oil Prices Climb as US Crude Inventories Decline: West Texas Intermediate crude rose 50 cents, or 0.71%, to settle at $70.58 a barrel, while Brent crude gained 20 cents, or 0.27%, to close at $73.39. US crude inventories and distillate supplies fell, while gasoline inventories rose during the week ending December 13.
- EUR/USD Nears Year Low as Hawkish Fed Outlook Strengthens Dollar: EUR/USD ended at 1.0364, dropping 1.05% after the Federal Reserve’s cautious rate outlook boosted the dollar. The pair broke decisively below key support near 1.0400, continuing its bearish trend. Price action remained well below the 50-SMA at 1.0510 and the 100-SMA at 1.0521, signalling entrenched downward momentum. Immediate support lies at 1.0350, with a potential break exposing 1.0300, last seen in early 2023. Momentum indicators point lower, suggesting limited signs of reversal. Buyers would need to reclaim 1.0450 and the 50-SMA to slow the decline, but for now, rallies remain selling opportunities.
- GBP/USD Under Pressure After Key Breakdown Below 1.2600: GBP/USD fell 1.00% to close at 1.2577, extending its broader downtrend as sellers defended key resistance levels. The pair broke below 1.2600, encountering immediate support at 1.2550 and 1.2500. Momentum indicators, including RSI, signalled strong bearish control, with the failure to establish higher lows reinforcing the downtrend. Upside resistance lies at 1.2650, where sellers are expected to reemerge. A sustained break below 1.2500 could open the door for further declines, with buyers needing a close back above 1.2650 to indicate any stabilisation.
- USD/CAD Extends Bullish Breakout Toward Fresh Highs: USD/CAD rose 0.68% to close at 1.4430, maintaining its bullish momentum. The pair traded firmly above the rising 50-SMA at 1.4213 and 100-SMA at 1.4128, confirming strong underlying support. Immediate resistance is now at 1.4450, with a potential breakout targeting the psychological level of 1.4500. On the downside, support is located at 1.4370 and 1.4300, where buyers are likely to step in. Momentum indicators remain bullish but show no signs of overbought conditions, suggesting room for further upside as long as key support levels hold.
- USD/CHF Breaks Above 0.9000 as Bulls Regain Control: USD/CHF surged 0.86% to close at 0.9004, breaking decisively above the psychological 0.9000 level. The pair maintained strong bullish momentum, trading above the rising 50-SMA at 0.8874 and 100-SMA at 0.8854. Immediate resistance lies at 0.9050, aligning with previous swing highs, while support is seen at 0.8950 and 0.8900. The RSI remains elevated but shows no divergence, indicating sustained buying interest. A close above 0.9000 confirms the trend reversal, with further upside likely if resistance at 0.9050 is breached.
- Gold Tumbles as Hawkish Fed Pressures Market: Gold prices fell 1.64% to close at $2,592, breaking below key support at $2,600. The session saw the metal struggle to regain the 50-SMA at $2,666 and 100-SMA at $2,654, confirming bearish momentum. Immediate support lies at $2,580, with a further decline potentially exposing $2,550. Upside resistance is now at $2,620, where sellers are likely to reemerge. Despite oversold RSI conditions, gold remains under pressure, with bearish momentum likely to dominate unless a strong recovery above $2,620 materialises.
- Nvidia Reverses Gains to End Lower: Nvidia shares dropped 1.1%, erasing earlier gains that briefly lifted the stock out of correction territory. Despite a year-to-date surge of over 160%, the stock was unable to maintain momentum as broader market weakness weighed on technology shares.
- General Mills Slides on Weaker Outlook: General Mills fell 3.1% after the company announced a downward revision to its earnings outlook. Adjusted earnings per share are now expected to decline by 1% to 3%, compared to the earlier forecast of a range between a 1% loss and a 1% gain, dampening investor sentiment.
- Jabil Surges on Strong Earnings: Jabil soared 7.3% after reporting $2 in core earnings per share for its first quarter, exceeding Wall Street expectations of $1.88. Revenue came in at $6.99 billion, also beating estimates of $6.61 billion, driving strong buying interest in the stock.
- Heico Drops on Revenue Miss: Heico shares tumbled 8.7% after the aerospace company reported $1.01 billion in revenue for the quarter, falling short of analysts' expectations of $1.03 billion. The miss raised concerns about the company's ability to meet future growth targets.
- Rivian Plunges on Analyst Downgrade: Rivian lost 11.2% after Baird downgraded the electric vehicle maker to neutral from outperform, citing sluggish EV sales and a lack of catalysts for 2025. The firm maintained a positive long-term outlook but flagged near-term challenges for the stock.
- Netgear Gains on Potential China Router Ban: Netgear shares rose 4.8% following a Wall Street Journal report that the US government is considering banning Chinese-made routers. The California-based company is well-positioned to benefit, as it also produces routers domestically.
As markets closed on a tumultuous note, the Dow Jones extended its historic losing streak to 10 days, while the S&P 500 and Nasdaq also recorded sharp declines amid renewed pressure from the Federal Reserve’s cautious rate outlook. Treasury yields surged, with the 10-year yield breaching 4.5%, further weighing on investor sentiment. European markets held steady despite global volatility, supported by positive moves in Renault shares and revised Eurozone inflation figures. In Asia, Japanese trade data exceeded expectations, but regional markets delivered mixed performances. Meanwhile, oil prices inched higher on falling US crude inventories, though gains were capped by the Fed’s measured tone. As investors digest the central bank’s signalling of fewer rate cuts in 2025, the broader market faces growing uncertainty, with attention now turning to economic data and global policy decisions to gauge the path ahead.
