Wall Street tumbles as Fed projects slower rate cuts next year
Fed cuts rates by 25 bps
Signals slower pace of rate cuts in 2025
Dow notches longest losing streak since 1974
Bitcoin tumbles after Powell says Fed has no desire to hold it
Updates to U.S. market close
By Stephen Culp
NEW YORK, Dec 18 (Reuters) -Wall Street closed sharply lower on Wednesday, with the Dow falling over 1,100 points after the U.S. Federal Reserve delivered a rate cut as expected but signaled it will ease the pace of further cuts in the coming year.
For the Dow it was its tenth consecutive daily loss, marking its longest losing streak since 1974 and its biggest daily percentage decline since early August. The Nasdaq and S&P 500 also logged their largest one-day drops in months.
Benchmark Treasury yields moved higher on the news, and the dollar gained.
"Let's not forget, you tend to get knee-jerk reactions on Fed Day and then cooler heads prevail the next day," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "The reality is still we have a strong economy and a Fed that is by no means looking to hike any time soon. There are still cuts, likely coming just a little later in 2025."
As expected, the Federal Open Market Committee (FOMC) cut the Fed funds target rate by 25 basis points at the conclusion of its final policy meeting of 2024.
But the central bank also reduced the number of projected rate cuts in the coming year. The policymakers now expect two interest rate cuts by the end of 2025, down from four in September, and set up the likelihood of a pause in January.
"The Fed didn't throw any curveballs, right? They cut as expected, and they're using language hinting at fewer cuts next year and into 2026," Detrick added. "The market was holding out hope that maybe there'd be a little more dovishness to the statement, but that wasn't the case."
In his subsequent press conference, Fed Chair Jerome Powell offered assurances that the economy is strong, inflation has come closer to the 2% goal, and monetary policy is well-positioned to deal with risks.
The Dow Jones Industrial Average .DJI fell 1,123.03 points, or 2.58%, to 42,326.87, the S&P 500 .SPX fell 178.57 points, or 2.95%, to 5,872.03 and the Nasdaq Composite .IXIC fell 716.37 points, or 3.56%, to 19,392.69.
Earlier, European shares closed modestly higher, buoyed by technology stocks and French automaker Renault RENA.PA, but gains were held in check ahead of the Fed's rate decision.
MSCI's gauge of stocks across the globe .MIWD00000PUS fell 8.93 points, or 1.03%, to 855.09.
The STOXX 600 .STOXX index rose 0.15%, while Europe's broad FTSEurofirst 300 index .FTEU3 rose 2.56 points, or 0.13%.
Emerging market stocks .MSCIEF fell 0.39 points, or 0.04%, to 1,092.81. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed lower by 0.05%, to 579.42, while Japan's Nikkei .N225 fell 282.97 points, or 0.72%, to 39,081.71.
Yields for 10-year U.S. Treasuries gained after the Fed flagged the slower pace of easing.
The yield on benchmark U.S. 10-year notes US10YT=RR rose 11.3 basis points to 4.498%, from 4.385% late on Tuesday.
The 30-year bond US30YT=RR yield rose 7.3 basis points to 4.6525% from 4.579% late on Tuesday.
The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 10.5 basis points to 4.346%, from 4.241% late on Tuesday.
The dollar extended its gains against a basket of world currencies as investors digested the Fed's revised outlook.
The dollar index =USD rose 1.09% to 108.09, with the euro EUR= down 1.13% at $1.037.
Against the Japanese yen JPY=, the dollar strengthened 0.76% to 154.63.
Bitcoin accelerated its losses after Powell said the Fed has no desire to hold the cryptocurrency amid debate over whether the incoming Trump administration might build a bitcoin reserve.
Bitcoin BTC= fell 5.17% to $100,916.00. Ethereum ETH= declined 6.14% to $3,692.50.
Oil prices settled higher in the wake of the Fed's decision.
U.S. crude CLc1 rose 0.71% to settle at $70.58 per barrel, while Brent LCOc1 settled at $73.39 per barrel, up 0.27% on the day.
Gold fell in opposition to the greenback. Spot gold XAU= fell 1.94% to $2,594.24 an ounce. U.S. gold futures GCc1 fell 2.05% to $2,590.20 an ounce.
World FX rates YTD http://tmsnrt.rs/2egbfVh
Asian stock markets https://tmsnrt.rs/2zpUAr4
Dot plot https://reut.rs/4gZlqIH
Reporting by Stephen Culp; Additional reporting by Amanda Cooper and Tom Westbrook
Editing by Nick Zieminski and Rosalba O'Brien
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