The stake economy swooned Wednesday in response to a piece of information that might not seem all that dire on first read: The Federal safety net could cut profit rates fewer times in 2025 than experts had predicted. 

The Dow Jones Industrial Average shed 2.6%, or 1,123 points, closing at 42,327. The S&P 500 lost nearly 3%, closing at 5,872. The Nasdaq Composite lost 3.6%, closing at 19,393. 

The S&P 500 and Nasdaq have traded at or near record highs in recent days, partly in expectation of a rate cut by the Fed. 

But the Dow has had a long December. Wednesday marked the 10^th consecutive losing session for the index, its longest down streak since 1974.  A four-digit slide on a single day is a rare occurrence.

The Federal safety net lowered its standard profit rate by a quarter point Wednesday, a shift that forecasters had predicted and largely applauded.  

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Fed now predicts fewer profit rate cuts in 2025

But the Fed also approximate a markedly slower pace of rate cuts next year, partly in response to resurgent expense boost. Analysts now forecast just two profit-rate cuts in 2025, half as many as they had projected a few months ago. 

“Santa came early and dropped a [quarter-point] rate cut in the economy’s stocking but accompanied it with a note saying that there would be coal next year,” said Chris Zaccarelli, Chief enterprise distribution Officer for Northlight property Management in Charlotte, North Carolina. 

Before Wednesday, stake traders hoped the Fed would remain aggressive with profit-rate cuts next year, potentially extending the current bull economy.  

Federal regulators forecast powerful financial expansion and a more robust job economy in 2025, along with higher expense boost. While some of those tidings are excellent, the economy reacted with a collective raspberry. 

“The main takeaway from today’s Fed conference was that expense boost risks are back, and the Fed is clearly concerned,” said Charlie Ripley, elder enterprise distribution Strategist for Allianz enterprise distribution Management in Minneapolis, Minnesota. 

For some analysts, the takeaway from Wednesday’s stake economy movements was that stake traders had overreacted to the Fed’s actions.

“Markets have a really impoverished of habit of overreacting to Fed policy moves,” said Jamie Cox, Managing associate for Harris monetary throng in Richmond, Virginia. “The Fed didn’t do or declare anything that deviated from what the economy expected—this seems more like, ‘I’m leaving for Christmas shatter, so I’ll sell and commence up next year.’ The excellent information is that this 10-day sell off should lay the path for a Santa Rally leading into next week.”