The Dow Jones Industrial Common sank deeper into the historical past books on Wednesday, with the index posting its tenth straight dropping day as a disappointing fee outlook by the Federal Reserve rocked the inventory market.

The Dow misplaced 1,123.03 factors, or 2.58%, to 42,326.87, for its worst dropping streak since an 11-day slide in 1974. The Wednesday decline was its worst since August and solely the second time it misplaced 1,000 factors this 12 months in a single session. The S&P 500 misplaced 2.95% to five,872.16 and the Nasdaq Composite shed 3.56% to 19,392.69 with losses intensifying into the shut of buying and selling.

The central financial institution decreased its in a single day borrowing fee by 1 / 4 level to a goal vary of 4.25% to 4.5%, as anticipated. Nevertheless, the Fed indicated Wednesday afternoon it could solely reduce charges twice in 2025, fewer than the 4 cuts given in its final forecast. Fed Chair Jerome Powell mentioned the central financial institution’s transfer to chop charges in latest months permits it to “be extra cautious as we think about extra changes to our coverage fee.”

Earlier than Wednesday, merchants have been hoping the Fed would keep aggressive with fee cuts in 2025, fueling the bull market additional. Treasury yields jumped following the Fed’s cautious outlook, pressuring share costs. The ten-year Treasury yield crossed above 4.50%.

“Danger property and a really extremely valued inventory market does not like the concept fee cuts are much less doubtless on each side of the mandate,” DoubleLine Capital CEO Jeffrey Gundlach mentioned on CNBC’s “Closing Bell.” “The takeaway that I received from that press convention was there’s not going to be an aggressive reducing cycle … and the market is just about in sync with that.”

The Dow’s dropping streak started the session after it closed above 45,000 for the primary time ever on Dec. 4. The whole losses for the Dow throughout its dropping streak have totaled 6%.

“Goodbye punch bowl. No Christmas cheer from the Fed. Policymakers see greater inflation and decrease unemployment in 2024. There’s merely no purpose to be dovish on condition that outlook,” mentioned David Russell, world head of market technique at TradeStation. “The simple lifting is completed now that charges are not clearly restrictive. It is a logical time to pause.”

Earlier than it intensified on Wednesday, the Dow’s worst funk in a long time was largely brought on by a rotation out of outdated financial system shares and into know-how shares, a sector that the century-old measure underweights in comparison with broader market metrics.

However the entire market was rocked on Wednesday. The S&P 500’s loss was additionally its worst since August and reduce its 2024 achieve to 23%.