US benchmark equity indexes experienced a decline on Wednesday, as Treasury yields surged after the Federal Reserve decreased its benchmark lending rate by 25 basis points, indicating fewer cuts in the future compared to projections made in September. The Nasdaq Composite fell by 3.6% to 19,392.7, while the S&P 500 dropped 3% to 5,872.2.
The Dow Jones Industrial Average decreased by 2.6% to 42,326.9, marking its first 10-day losing streak since 1974. Each sector finished lower, led by a significant drop of 4.7% in consumer discretionary. The Federal Open Market Committee of the central bank has adjusted interest rates to a range of 4.25% to 4.50%, aligning with Wall Street's forecasts. "With today's action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive," stated Fed Chair Jerome Powell during a press conference following the FOMC meeting.
"We can therefore be more cautious as we consider further adjustments to our policy rate." The updated Summary of Economic Projections from the FOMC revealed that members have raised their median federal funds rate outlook for 2025 to 3.9%, up from the previously projected 3.4% in September. Additionally, this rate projection was increased for 2026 to 3.4% from 2.9%, and to 3.1% from 2.9% for 2027. "While we don't think investors should rule out a January cut completely, with the Fed's preferred inflation rate stuck at 2.8% year-on-year, and expectations that President-elect Donald Trump will employ an inflationary political strategy, it is logical that the Fed will take a more cautious approach in the New Year," noted TD Economics. The US 10-year yield escalated by 12.7 basis points to 4.51% on Wednesday, while the two-year rate witnessed an increase of 11.8 basis points to 4.36%. In economic updates, US housing starts reported an unexpected decrease last month, largely due to a significant decline in multi-family projects, according to government data. Furthermore, mortgage applications in the US fell for the first time in five weeks as interest rates across all loan types rose, as reported by the Mortgage Bankers Association. West Texas Intermediate crude oil edged down 0.1% to $70.00 per barrel on Wednesday. In corporate news, shares of electric vehicle manufacturer Tesla dropped by 8.3%, marking the second-steepest decline on the S&P 500 and the Nasdaq.
Toro laid out a fiscal 2025 outlook that fell below analysts' estimates despite its fourth-quarter sales coming in lower than expected, leading to a 4.5% decline in shares of the lawn mowers and golf equipment maker. Conversely, Jabil saw its shares surge by 7.3% after reporting smaller-than-expected declines in fiscal first-quarter results while also raising its 2025 outlook. In the commodities market, gold prices decreased by 2% to $2,608.00 per troy ounce, and silver dropped by 3.2% to $29.92 per ounce..