On a tumultuous Wednesday, Federal Reserve Chair Jerome Powell indicated that the bar for future interest rate cuts may be set higher than before, sending shockwaves through the stock marketThe three major indices took a significant dive, with the Dow Jones Industrial Average plummeting over 1,100 pointsThis marked its tenth consecutive day of losses, a streak not seen since 1974, reminiscent of the volatile economic periods of that decade.

By the end of trading, the Dow closed down by 1,123.03 points, representing a 2.58% decline, settling at 42,326.87. The Nasdaq Composite dropped 716.37 points or 3.56%, ending at 19,392.69, while the S&P 500 lost 178.45 points, a 2.95% decrease, finishing at 5,872.16. Notable stocks were heavily impacted: Tesla saw a decline exceeding 8%, Broadcom fell by 6.9%, and Nvidia slipped 1%. In the Chinese market, the Nasdaq Golden Dragon Index dropped by 2.4%, with Alibaba's shares falling dramatically by 24%.

Across the Atlantic, European markets reacted similarly, albeit with some differences

The German DAX fell slightly, finishing down 2.99 points or 0.01% at 20,250.70, whereas the UK's FTSE 100 ticked up by 2.46 points, a marginal increase of 0.03%, closing at 8,197.66. The French CAC 40 saw a rise of 18.92 points or 0.26%, landing at 7,384.62, and the European Stoxx 50 Index climbed by 15.17 points, reflecting a 0.31% gainSpain's IBEX 35 and Italy's FTSE MIB also experienced slight increases.

In the Asia-Pacific region, market reactions varied, with Japan's Nikkei 225 down 0.72%. Meanwhile, Indonesia's Jakarta Composite Index also fell by 0.7%, but South Korea's KOSPI Index bucked the trend, rising more than 1.1%.

In the realm of cryptocurrencies, discussions surrounding the incoming government's potential establishment of a Bitcoin reserve continued to stir interestPowell clarified the Fed's stance, noting that the central bank has no intentions of holding Bitcoin, stating, “We are not permitted to hold Bitcoin.” He highlighted that the legal implications surrounding cryptocurrency are a matter for Congress to deliberate, emphasizing that the Fed does not seek to change existing laws regarding cryptocurrency possession.

The precious metal market experienced turbulence as well, with spot gold prices dropping below the critical $2,600 per ounce threshold for the first time since November 18. Following the Fed's latest decision, gold fell by $37, corresponding to a daily decline of 1.73%.

In the oil markets, January futures for West Texas Intermediate (WTI) crude oil rose by 50 cents, marking a 0.71% increase, closing at $70.58 per barrel

Similarly, the February futures for Brent crude oil gained 20 cents, a 0.27% rise, to settle at $73.39 per barrel.

The foreign exchange market showed a rebound in the dollar, driven by the Fed shifting its policy stance for 2025 towards a more hawkish outlookIn recent trades, the dollar appreciated 1.1% against the euro, 0.8% versus the yen, 0.9% against the British pound, and 1.6% compared to the Australian dollarTraders on the futures market are now contemplating the possibility of one or two more interest rate cuts from the Fed next year—a significant increase from the previously perceived likelihood of 38% to approximately 57% following the announcement.

In the macroeconomic landscape, the Fed announced a 25 basis point rate cut, bringing the benchmark interest rate down to 4.25%-4.50%, marking the third consecutive reductionThis decision was in line with market expectations

Another 25 basis point cut had occurred in NovemberDuring the subsequent press conference, Powell noted that the threshold for future rate cuts could be raised, reflecting a more cautious stanceHe mentioned, “Through today’s action, we have reduced the policy rate from its peak by a full percentage point, and our stance is now significantly less restrictiveThus, we can afford to be more prudent as we contemplate further rate adjustments.”

Powell also stressed the importance of tracking progress on inflation before considering additional rate cuts, highlighting the Fed's dual mandate of maintaining inflation and employmentAlthough the officials cut rates for the third consecutive time, they have moderated expectations for the frequency of cuts in 2025, signaling a more cautious approach to easing borrowing costs.

Analysts have pointed to the enormous federal deficit, suggesting that the possibility of another rate cut in January has not been entirely ruled out

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AJ Bell investment director Russ Mould agreed with the Fed's decision to cut rates by 25 basis points but warned that economic projections might indicate only two rate cuts next yearWith the Fed known for being data-dependent, the enormous federal deficit looms large, with a staggering $1 trillion in annual interest paymentsReducing interest rates could potentially alleviate pressure on the U.Seconomy.

From a fiscal perspective, Chief Economist Kathy Bostjancic of Nationwide Mutual Insurance Company projected that the Fed might lower rates by an additional 75 basis points next year, citing projected anti-inflation trends, particularly within the services sectorHowever, she cautioned that inflation may exceed baseline predictions due to increased tariffs and specific import targets.

A new report indicated that the third-quarter current account deficit in the U.Shit a record high, raising alarms about the threats of a dual deficit

The U.SBureau of Economic Analysis revealed that the current account deficit ballooned by $35.9 billion, or 13.1%, reaching a staggering $310.9 billionThis deficit measures the flow of goods, services, and investments in and out of the United States and accounted for 4.2% of the GDP—the highest since the first quarter of 2022. Economists caution that while the current account deficit does not significantly impact the dollar yet, this could change if the trend continuesAccording to Paul Ashworth, Chief Economist for North America at Capital Economics, the national reliance on income surpluses to manage this deficit has diminished, heightening concerns over the long-term risks of a government debt crisis.

In corporate news, Merck announced a hefty up to $2 billion acquisition of rights to a weight-loss drug under development by Jiangsu Hansoh PharmaceuticalThis high-stakes move occurs amid the burgeoning weight-loss drug market, where Merck will secure global exclusive rights to the experimental oral medicine, HS-10535, targeting GLP-1 receptors.

Additionally, Ford Motor Company confirmed the appointment of a new quality chief as part of its efforts to reduce warranty costs and rectify its industry-leading recall record