Stocks plummeted Wednesday after the Federal Reserve signaled ongoing concern over the state of inflation in the near term, and indicated it would approve just two rate cuts in 2025. As a result, the Dow Jones Industrial Average gave up more than 1,100 points, while the other major indexes plunged 3% or more on the stock market today.
The Dow Jones Industrial Average rose 0.4% at midday, aiming to crack a nine-session losing streak, but flipped and lost 1,123 points, or 2.6%. Now at 10 days, it’s the Dow’s longest losing streak since an 11-day plunge ending in October 1974, slightly more than a half-century ago.
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The S&P 500 climbed as much as 0.3% Wednesday morning but ended the day losing 3%. Both the Dow and S&P are now below their 50-day moving averages.
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The Nasdaq composite, which has gained a robust 7.6% since its sell-off on Nov. 15, reversed early small gains and eventually sank 3.6%.
The tech-heavy index dropped well below the 20,000 mark after closing above it the previous two sessions, and undercut its 21-day exponential moving average.
The Nasdaq 100, which tracks the 100 largest nonfinancial companies on that exchange, also lost 3.6%.
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Small caps tracked mostly along with large caps, as the Russell 2000 crashed 4.1%. At 2,231, the Russell index posted its lowest close since six weeks. Wednesday’s pummeling also slashed the benchmark’s year-to-date gain to 10%.
Among IBD’s 197 industry groups, only four groups rose. They included data storage, managed care, and wholesale drug firms.
The biggest decliners on a price-weighted basis included automakers, oil royalty trust, computer hardware and peripherals, integrated computer systems, restaurants, Northeast and West/Southwest banks, plastics and security software. All of these groups plunged 5% or more.
Up until the announcement, volume was tracking mildly lower vs. the same time Tuesday on both main exchanges. Yet trading volume picked up steam and volume on both the Nasdaq increased 4% vs. the prior session. On the New York Stock Exchange, turnover jumped 15%.
Thus, as noted in Wednesday’s Big Picture column, the sell-off in higher volume constituted a significant distribution day of intense professional selling and impacted IBD’s current outlook for ideal exposure in the stock market today.
Stock Market Today: How Treasury Yields Acted
The yield on the U.S. Treasury 10-year note in recent days acted as if it’s pinned near 4.40%. After the Fed decision, the yield jumped to 4.52%. Earlier this year, the yield peaked at 4.73%.
Bond traders almost unanimously expected the U.S. central bank to trim the fed funds rate by a quarter point to a target range of 4.25%-4.5%.
However, after the Fed news, CME FedWatch’s survey showed only an 11% probability that the Fed would trim rates again at the Jan. 29 meeting. The chance of a quarter point cut at the March meeting is also relatively muted at almost 47%.
The fed funds rate peaked in recent years at a target rate of 5.25%-5.5%.
3:26 p.m. ET
What The Fed Did On Rates
A new forecast among policy board members lowered the expectations on rate cuts from the U.S. central bank down from four reductions next year. The projected U.S. economic growth rate also saw a rise within the monetary policy committee to 2.5% from 2%, while the jobless rate forecast ticked lower to 4.2% from 4.3%.
“I would say today was a closer call, but it was the right call,” Powell said during the question-and-answer portion of the conference call, regarding the decision to ratchet down the fed funds rate for overnight cash infusions to large banks to a range of 4.25%-4.5%.
“We think the economy is in a really good place, and policy is in a really good place,” Powell added.
Jack McIntyre, portfolio manager at Brandywine Global, a mutual fund company, called the move a “hawkish cut” and added, “Stronger expected growth married with higher anticipated inflation. It’s no wonder the Fed reduced the number of expected rate cuts in 2025.”
2:35 p.m. ET
Stock Market Today: Dealing With A Distribution Day
The stock market today is trying to rebound after logging a distribution day in the prior session. Distribution points to unusually heavy professional selling.
However, the indexes fell moderately after a string of all-time highs lately. For more about Tuesday’s critical action, read Tuesday’s The Big Picture.
12:26 p.m. ET
Jabil Breaks Out With Double-Digit Gains
Meanwhile, electronics giant Jabil (JBL) broke out with a stout gain of as much as 11% in heavy turnover. Jabil held most of those gains following the Fed news.
Jabil, which reported better than expected November-quarter results — earnings of $2 per share, revenue of $6.99 billion, down 17% — cleared a large cup with handle that showed a 139.21 entry. The company raised its fiscal 2025 earnings outlook to $8.75 a share from $8.65 a share.
Because the stock gapped above its buy point, a better entry is the first five-minute high, or 148.17. That means a reasonable buy zone goes to 155.58.
10:51 a.m. ET
Broadcom, Heico Among Big Movers
Meanwhile in tech land, Broadcom (AVGO) held its recent explosive gains nicely. Shares edged mildly lower for a second straight session after bolting more than 35% higher over two days following a good fiscal fourth quarter in which earnings and sales lifted more than 25%, with a solid outlook.
Meanwhile, leaders in the stock market today moved in mixed fashion.
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Heico (HEI), a stock market leader, fell in fast turnover despite reporting good results and keeping its semiannual dividend at 11 cents per share. The stock punched down through its 50-day moving average and undercut the low of a recent flat base. That triggered a sell signal.
Heico, a major components maker in the aerospace industry, posted an 8% gain in sales to $1.01 billion, while earnings jumped 34% to 99 cents a share as operating margin improved.
Birkenstock Rallies On Quarterly Results
Birkenstock (BIRK) climbed on a solid revenue beat for the October-ended quarter and at one point rallied more than 9% for the week.
Known for its namesake sandals and clogs, Birkenstock is rapidly forming the right side of a base.
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The shoe stock rose on encouraging fundamentals, as revenue strode sharply higher. Amid a multitude of forex-adjusted sales figures, MarketSurge data shows sales at $507.5 million, up 28%. Analysts on consensus expected $460 million. Earnings came in at 32 cents a share on an adjusted basis, up an astounding 128% vs. a year earlier and 6 cents above views. Gross margin rose 320 basis points vs. the prior quarter to 59.5%.
Elsewhere in the stock market today, Netgear (NTGR) spiked on reports that the U.S. government is considering a ban of rival Chinese-built home internet routers on suspicion of hacking and privacy concerns. San Jose, Calif.-based Netgear had already gotten extended past the 5% buy zone after a Nov. one breakout from a seven-week cup with handle that displayed a 22.24 proper buy point.
Beyond The Stock Market Today
Gold pulled back lightly, down less than 0.5% to $2,651 an ounce on the Comex exchange.
Crude oil futures on the NYMEX rose more than 1% to $73 per barrel.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
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