Wall Street update: Dow Jones crashes 1,123 pts as hawkish comments by Fed chair spook investors; check details

The Fed cut rates by 25 basis points to the 4.25%-4.50% range. Still, Federal Reserve Chair Jerome Powell said more reductions in borrowing costs now depend on further progress in lowering stubbornly high inflation, remarks that showed policymakers are starting to reckon with the prospects for sweeping economic changes under a Trump administration.

Powell's explicit—and repeated—references to the need for caution from here on jolted Wall Street, sending stocks sharply lower, bond yields higher, and leading investors to dial back estimates of how far borrowing costs are likely to fall over the coming year.

The Dow Jones Industrial Average fell 1,123.03 points, or 2.58%, to 42,326.87; the S&P 500 lost 178.45 points, or 2.95%, to 5,872.16; and the Nasdaq Composite lost 716.37 points, or 3.56%, to 19,392.69.

The Dow suffered its 10th straight session of declines, its longest streak of daily losses since an 11-session skid in October 1974.

The Dow and S&P saw their biggest one-day percentage decline since August 5, and the Nasdaq saw its biggest daily decline since July 24, as per a Reuters report.

The central bank revised its outlook for rate cuts in 2025. It indicated that there will be two reductions. That’s down from the four forecasts in September. Fed Chair Jerome Powell said that the central bank would be looking for progress on inflation, noting, “We have been moving sideways on 12-month inflation.”

“We understand very well that prices went up by a great deal, and people really feel that, and it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in that burst of inflation that was very global,” he said. “Now we have inflation itself is way down—but people are still feeling high prices—and that is really what people are feeling.”

Powell added that the best solution for this is for the Federal Reserve to continue working to get inflation back down to its target so wages can catch up, ultimately restoring consumers’ good feelings about the economy.

With yesterday's cut, the Fed slashed the lending rates for the third consecutive time. Yesterday, there was one dissenting vote to the policy move, cast by Cleveland Federal Reserve President Beth Hammack.