Overview
Wall Street endures one of its worst sessions of 2025 as the Federal Reserveederal" class="inline-tag-link">Federal Reserve, on December 18, cuts its benchmark rate for the third time this year but forecasts just two more in 2025, halving prior expectations.[2]
Key Developments
- S&P 500 drops 178 points or 3%, Dow loses 1,123 points or 2.6%, Nasdaq falls 3.6% on Wednesday's Fed projections.[2]
- Fed funds rate now 4.25% to 4.50% after full point ease since September; median official view: two 2025 cuts, or 0.5%.[2]
- Chair Jerome Powell at 2 p.m. ET presser: 'We are in a new phase of the process,' citing strong jobs, rising inflation.[2]
- Cleveland Fed's Beth Hammack lone dissenter against December 18 cut.[2]
Analysis
| Factor | Current Status | Implications |
|---|---|---|
| Economic | Sticky inflation, job market solid; Nvidia down 13% from peak | Slowed cuts curb borrowing boost, pressure growth stocks; gold, bonds may rally on soft landing bets.[2] |
| Political | Powell flags Trump tariffs inflating prices: 'When the path is uncertain, you go a little slower.' | Policy fog from new administration slows Fed, risks higher yields.[2] |
| Social | Investors overreact per Jamie Cox of Harris Financial: 'Markets have a really bad habit...' | Holiday thin trading amplifies moves into year-end.[2] |
Expert Reactions
Powell: 'Not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.'[2] Jamie Cox: 'The Fed didn't do or say anything that deviated from what the market expected.'[2]
What's Next
January jobs data to gauge cut odds; Nvidia earnings watch as momentum fades.