NEW YORK (dpa-AFX) – The US Federal Reserve’s expectations for interest rate developments in the coming year put the New York stock exchanges under heavy pressure on Wednesday. As expected, the key interest rate was reduced by 0.25 percentage points. What was particularly important, however, was that the central bankers significantly scaled back their expectations of further interest rate cuts. After the records that have been recorded again and again since the beginning of November, investors on the financial market fled risky assets on a large scale.
After the Dow Jones Industrial was moderately in the profit zone for long stretches, the Fed’s statements pushed it into the red by 2.58 percent to 42,326.87 points. With the tenth day of losses in a row, he has now almost completely canceled out the gains that had accumulated since Donald Trump’s election victory at the beginning of November. According to Bloomberg data, the previous day the Dow had already sealed its longest negative streak since 1978.
The losses became even greater in the broad market and in the technology sector, where developments had recently looked better. The S&P 500 fell by 2.95 percent to 5,872.16 points, recording its largest daily loss since the beginning of August. The NASDAQ 100, which focuses on technology stocks, ultimately lost 3.60 percent to 21,209.32 points. After a record rally that had already ended for him the day before, he experienced the biggest setback since the end of July.
“We got another 25 basis point rate cut from the Fed, but the updated forecasts and President Powell’s press conference confirm that the Fed will take a much more cautious approach next year,” said ING Bank economist James Knightley. Inflation remains tough and President Trump’s policy mix represents a high hurdle to justify further interest rate cuts in 2025.
Market observer Thomas Altmann from QC Partners mentioned that in September the Fed had promised four interest rate cuts, but now the monetary authorities are only expecting two lower interest rate steps for 2025.
Among the individual stocks, stocks related to artificial intelligence (AI) remained in the spotlight. A recovery in NVIDIA’s shares was not long-lasting, as the chip company’s price on the Nasdaq stock exchange slipped more than one percent into the red late on. The losing streak for the AI investor favorite has already extended to five trading days. There was no winner left on Wednesday among the “Magnificent 7” that set the direction on the Nasdaq stock exchange.
Instead of Nvidia, investors have recently focused their imagination for artificial intelligence on its competitor Broadcom. There has recently been profit-taking in its shares, which continued on Wednesday, with the loss ultimately amounting to almost seven percent. The price losses were even greater after a record run by the electric car manufacturer Tesla.
UnitedHealth shares were the only winner in the Dow. The health insurer’s shares recovered by almost three percent from a prolonged slide that began a fortnight ago with the murder of Brian Thompson, the head of the insurance division.
At General Mills, the share price fell by a good three percent due to lower annual targets, which were justified in the price war with discounts granted. A JPMorgan expert said this was bad news not just for the food company, but for the entire industry.
On the other hand, the German Birkenstock group made a positive statement, with its shares listed in New York defending an increase of two percent. According to expert Luca Solca from Bernstein Research, the sandal manufacturer’s sales in the fourth quarter clearly exceeded expectations. The expert criticized the margin somewhat, but investors overlooked that.
In pharmaceuticals, Corvus Pharmaceutical (Corvus Pharmaceuticals) fell 36 percent after the drug developer reported preliminary data from an early trial of the drug soquelitinib, which is being tested in patients with moderate to severe atopic dermatitis.
The euro fell significantly after the Fed’s statements. The common currency fell to $1.0365 after being more than a cent higher before the interest rate decision. The European Central Bank had set the reference rate at $1.0496.
Bitcoin also gave up significantly by moving further away from the previous day’s record. This also had a negative impact on stocks that make their money with cryptocurrency. The shares of the platforms Coinbase and Riot Platforms each lost more than ten percent.
On the US bond market, the yield on ten-year bonds rose to 4.52 percent. The futures contract for the papers with this term fell by 0.85 percent to 108.97 points./tih/men
— By Timo Hausdorf, dpa-AFX —