MARKET SNAPSHOT
U.S. stocks fell broadly after the Federal Reserve cut interest rates as expected, but signaled they might be higher than investors expected in 2025. Treasury yields and the dollar jumped after the Fed pulled back on the number of rate cuts it foresees for 2025. Oil settled higher, with U.S. crude supplies falling for a fourth straight week.
MARKET WRAPS
EQUITIES
The Dow Jones Industrial Average fell more than 1,100 points after the Federal Reserve signaled they might keep interest rates higher than investors expected in 2025.
The blue chip index fell for a 10th consecutive session, its longest losing streak in five decades, after Fed officials pared rates by a quarter percentage point and disappointed investors by signaling just two more cuts next year.
The declines followed the Fed's widely expected interest-rate cut, its third of 2024. They accelerated after Fed Chair Jerome Powell's press conference spurred concerns that interest rates might not go down again anytime soon.
The Nasdaq Composite dropped 3.6%, while the Dow fell 2.6% and the S&P 500 lost nearly 3%.
"Equity markets are just digesting and maybe recalibrating on how much the Fed is going to be lowering rates down the road," said Thomas Urano, managing partner at Sage Advisory in Austin, Texas.
Earlier Wednesday, Chinese shares ended higher, with semiconductor and software stocks leading gains.
The benchmark Shanghai Composite Index rose 0.6%, the Shenzhen Composite Index gained 0.6%, while the ChiNext Price Index was flat. In Hong Kong, an advance was supported by auto and tech stocks. The benchmark Hang Seng Index closed 0.8% higher.
Despite concerns over the fundamentals of Chinese equities, Beijing's robust stimulus measures are difficult to overlook, said Charu Chanana, chief investment strategist at Saxo. She suggested a barbell strategy to capitalize on both defensive and offensive opportunities.
Japanese stocks closed lower, with declines led by tech stocks. Meanwhile, Nissan Motor surged 24% to its limit high after the company confirmed reports that it was exploring a potential merger with Honda Motor. The Nikkei Stock Average fell 0.7%.
Stocks in Australia slipped, as the S&P/ASX 200 Benchmark Index dropped 0.1%. The blue-chip S&P/ASX 20 Index, which includes the country's major banks and iron-ore miners, held steady.
New Zealand's NZX-50 closed 0.4% lower, snapping a run of three straight gains amid weakness in real-estate stocks.
COMMODITIES
Oil futures posted their first gain in three sessions, with prices getting a lift from official U.S. data showing a fourth consecutive weekly decline in domestic crude inventories.
West Texas Intermediate crude for January delivery rose 0.7%, to settle at $70.58 a barrel on the New York Mercantile Exchange. February Brent crude gained 0.3% to $73.39 a barrel on ICE Futures Europe.
"Oil pared gains in the aftermarket as the Fed seemed to raise the rate forecast dot plot," said Phil Flynn, senior market analyst at the Price Futures Group. The surge in the U.S. dollar did not help, he said.
That "overshadowed a fairly bullish" EIA report, said Flynn.
Front Month Comex December gold lost 0.3%, its fifth-consecutive decline, to settle at $2636.50 per troy once. Following the Fed decision, SPDR Gold shares fell 1.1%.
TODAY'S TOP HEADLINES
Fed Signals Intent to Slow Interest-Rate Cuts After Approving Quarter-Point Reduction
The Federal Reserve signaled greater doubt over how much it would continue to cut rates after agreeing to a reduction on Wednesday that Chair Jerome Powell conceded had been a close call.
The latest cut, approved by 11 of 12 Fed voters, will lower the Fed's benchmark federal-funds rate to a range between 4.25% and 4.5%, a two-year low.
The Fed reduced rates at its two previous meetings, beginning with a half-percentage-point reduction in September amid signs the labor market might be weakening. Officials approved a quarter-point cut last month.
Elon Musk Urges Republicans to Reject Bipartisan Spending Deal
WASHINGTON-Elon Musk has entered the chat.
The billionaire businessman and close ally of President-elect Donald Trump on Wednesday threw his support behind dissident Republican lawmakers who have sharply criticized a bipartisan funding deal released a day earlier, adding to the headaches facing House Speaker Mike Johnson (R., La.) in avoiding a partial government shutdown this weekend.
"This bill should not pass," said Musk on X. He later posted that any lawmaker "who votes for this outrageous spending bill deserves to be voted out in 2 years!" and then beamed out dozens of messages in the space of a few hours urging lawmakers to reject the bill.
Higher U.S. Tariffs Would Have Uncertain Impact On Eurozone Inflation, Says ECB's Lane
Higher U.S. tariffs on imports from Europe would weaken economic growth in the eurozone, but the effect on inflation is uncertain, European Central Bank Chief Economist Philip Lane said Wednesday.
The ECB a week ago lowered its growth forecast for the eurozone economy in 2025 to 1.1% from 1.3%, but Lane said the expansion would likely be slower if the currency area's exporters faced higher tariffs on sales to their largest overseas market.
However, Lane said there were scenarios in which inflation would slow as a result of higher tariffs, but also scenarios in which it would accelerate, with currency movements having an effect on the eventual outcome.
Cocoa Surges Past $12,000 on Supply Concerns
Cocoa prices soared to a fresh record high, topping the $12,000-a-ton mark as the crop outlook for West Africa worsens, fueling concerns of supply shortfalls.
Midday on Wednesday, New York-traded futures were 2.8% higher at $12,094 a ton, up 14% on the week so far.
Prices have more than doubled since the start of the year, as severe droughts resulted in poor harvests in Ghana and Ivory Coast-the world's biggest producers of cocoa beans-reducing global supplies.
Micron Shares Slide After Quarterly Outlook Misses Estimates
Micron Technology swung to a profit and posted higher revenue in its fiscal first quarter, though shares fell after the company's outlook missed estimates.
"While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year," Chief Executive Sanjay Mehrotra said.
For its fiscal second quarter, Micron forecast adjusted per-share earnings of between $1.33 and $1.53 on revenue between $7.7 billion and $8.1 billion. Analysts polled by FactSet are expecting adjusted earnings of $1.91 a share on revenue of $8.94 billion.
Supreme Court to Consider TikTok Ban
WASHINGTON-The Supreme Court on Wednesday said it would decide the constitutionality of a law that would effectively ban TikTok in the U.S. if the social-media app doesn't shed its Chinese ownership.
With the ban set to take effect Jan. 19, the court scheduled fast-track oral arguments for Jan. 10 on whether the law violates the First Amendment.
The justices' move, which comes two days after TikTok and a group of content creators sought their intervention, breathes new life into the challengers' legal prospects. The court was under no obligation to hear the case. Earlier this month, an appeals court upheld the ban, concluding that the government had a valid and lawful basis for taking action.
Expected Major Events for Thursday
00:00/AUS: Dec Consumer Inflationary Expectations Survey
00:00/NZ: Dec ANZ Business Outlook
00:30/AUS: Nov Foreign Exchange Transactions and Holdings of Official Reserve Assets
08:00/PHI: Philippine Monetary Policy meeting and decision
08:20/TAI: Nov Money Supply
08:59/JPN: Japan Monetary Policy Meeting decision
09:59/TAI: Taiwan Monetary Policy Decision
21:00/SKA: Nov PPI
21:45/NZ: Nov Overseas Merchandise Trade
23:30/JPN: Nov CPI (Nation), CPI ex-food (Nation)
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
December 18, 2024 16:57 ET (21:57 GMT)
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