The Dow Jones fell 2.6% this Wednesday, dragged down by the Federal Reserve’s poor inflation outlook.
At the close of the session, Wall Street’s main indicator accelerated its fall, ending 2.6% at 42,326 points, its worst day since August and the peak of its first 10-day negative streak since 1974.
The selective S&P 500 plummeted 2.95% to 5,872 units, and the Nasdaq index, which brings together the large technology companies, fared even worse by falling 3.56% to 19,392 points.
The Fed’s monetary policy meeting concluded with another cut to the benchmark interest rate by a quarter point to place it in a range between 4.25% and 4.5%, as expected, so the focus was rather in their price outlook.
And so, the United States central bank raised its inflation projection for 2025 to 2.5%, an increase of four tenths compared to the 2.1% forecast in September, so it could keep rates high longer than expected.
Read: Dow Jones has its worst losing streak in almost 50 years
The Fed estimates that inflation in 2024 will be 2.4% (previously it forecast 2.3%) and in 2025 it will rise to 2.5%, while in 2026 it will fall to 2.1% and will stabilize in 2027 at 2%.
These inflation forecasts, derived from “uncertain economic prospects”, have led the Fed to reduce its projections on interest rates, and if four cuts were previously expected in 2025, there will now be two.
“We will look for further progress on inflation as well as continued strength in the labor market, and as long as the economy and labor market are strong we can be cautious in considering further cuts,” said Fed Chairman Jerome Powell.
Following the Fed’s call for caution, there were strong movements in the debt markets, with the 10-year bond yield exceeding 4.5%.
Fear indicator shoots up 74%
Volatility took over the stock market: the Vix index, known as the “fear indicator”, soared 74%, and the worst affected sectors of the session were non-essential goods (4.74%), real estate (3.97% ) and communications (3.16%).
Among the large listed companies in the Dow, the biggest losses were for Amazon (4.60%), American Express (4.50%) and Goldman Sachs (4.25%), and only the health group UnitedHealth (2.92%) remained afloat.
In other markets, Texas oil rose to $70.58 a barrel thanks to a weekly drop in commercial crude reserves, but other assets, risky or considered ‘safe havens’, fell: bitcoin fell 4.6%, to $101,100, and gold fell 2%, to $2,606 an ounce.
With information from EFE
Follow us on Google News to always stay informed
