Dow Jones index lost more than 1,100 points, had a record losing streak in 50 years

The Dow Jones Industrial Average ended Dec. 18 down about 1,123 points, or 2.6%, at 42,326 after the Federal Reserve in a policy statement forecast only two interest rate cuts through 2025, instead of four as previously expected. The Fed now expects inflation to remain above target for longer than initially anticipated.

The Dow has fallen for 10 consecutive days, the first such streak of declines since September 20 to October 4, 1974, when the index fell for 11 consecutive sessions.

The Dow Jones Industrial Average is on a tear while the broader market remains strong. The index has lost less than 6% in its long losing streak, which is considered relatively small. Other indexes were at or near record highs before falling sharply on December 18. The S&P 500 fell 3%, while the Nasdaq Composite fell 3.6%.

Investors were expecting the Fed to cut interest rates by 0.25 percentage points on December 18, and as expected, that happened. However, markets plunged after the Fed announced that it expected only two rate cuts by 2025, and that rates would remain high. Stocks and bonds fell after the Fed's "hawkish" (cautious) cut, according to Jay Hatfield, CEO and Chief Investment Officer at Infrastructure Capital Advisors.

On December 17, investors predicted a 98% chance that the Fed would cut interest rates at its January meeting. But after Fed Chairman Jerome Powell's press conference ended on December 18, they rated the chance at just 6%, according to Fed interest rate futures data.

“ The market is not very enthusiastic about the expected path of interest rates in the future ,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.

UnitedHealth Group's 15% drop in shares this month has particularly dragged the Dow lower.

The insurer's sell-off began after a shooting that killed UnitedHealthcare CEO Brian Thompson. However, UnitedHealth shares rose about 3.3% on December 18.

Nvidia, the US chipmaker that joined the Dow in November, also helped drag the index down. Although Nvidia shares have risen more than 180% this year, they have fallen about 5% over the past month.

Despite the prolonged decline, the Dow is still up 14% year-to-date, rising more than 5,000 points in 2024.

Markets initially surged after the election results, as investors were relieved that a recount and legal wrangling were avoided. The mood was also buoyed by Mr. Trump’s pledges to cut regulation and taxes.

Quartz (Source: CNN)

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