Panic swept through Wall Street late Wednesday, sending the stock market into a nosedive just minutes after the Federal Reserve shared some surprising news. The central bank announced it expects fewer interest rate cuts next year, and investors didn’t take it well.
The Dow Jones Industrial Average tumbled by a whopping 1,100 points, a 2.5% drop, marking its tenth straight day of losses. The S&P 500 also fell sharply, down nearly 3%, making it the largest single-day drop after a Fed meeting since 2001, according to data shared with media by Deutsche Bank Research.
This sudden downturn left everyone wondering: Is this just a temporary stumble, or are we headed for even bigger losses?
Some experts see it as a sign of rough waters ahead. They point to the possibility of prolonged high interest rates and the uncertainties surrounding the U.S. economy under President-elect Donald Trump. But others say there’s no need to panic just yet, as the economy remains on solid ground.
“We’ve gotten so used to the market going up and up, but there’s going to be more bumps along the way,” said Ed Yardeni, president of Yardeni Research and a former strategist at Deutsche Bank. Still, he reassured that “the economy is doing fine,” which is a good sign for long-term investors.
By Thursday morning, the market showed signs of recovery. The Dow picked up about 250 points, or 0.6%, while the S&P 500 and Nasdaq also rebounded, rising 0.7% and nearly 1%, respectively.
The panic started with the Fed’s announcement that it had cut interest rates by a quarter of a percentage point. While that might sound like good news, what really spooked investors was the Fed’s forecast for fewer rate cuts ahead—just a half-point next year and another half-point in 2026.
Typically, lower interest rates help boost the economy by encouraging borrowing and spending. They also tend to drive up corporate profits and stock prices. But if rates stay high for longer than expected, those benefits could fade.
“It’s like the market threw a temper tantrum,” said Ivan Feinseth, a financial analyst at Tigress Financial.
What made things worse was Fed Chair Jerome Powell’s explanation for the decision. He said persistent inflation and uncertainties tied to Trump’s upcoming presidency played a role. Powell compared the situation to driving on a foggy night: “When the path is uncertain, you go a little slower.”
Some economists worry that Trump’s plans, such as imposing higher tariffs and deporting undocumented immigrants, could push up prices for everyday goods. And with a potential government shutdown looming, things in Washington, D.C., are looking more chaotic than ever.
“It’s not going to be a smooth ride for Trump’s second term,” said Yardeni, referring to the ongoing budget battle on Capitol Hill.
Despite all this, many experts still see opportunities for investors. They argue that the recent selloff could be a chance to buy stocks at a discount. Plus, the U.S. economy remains strong, with solid growth and historically low unemployment.
“This selloff is just another buying opportunity,” said Dan Ives, a tech-focused analyst at investment firm Wedbush.
Powell also struck a positive note, saying, “The economy is in a good place.” Bret Kenwell, an investment analyst at eToro, echoed this optimism, pointing to strong corporate earnings and the resilience of the overall economy. While the market might see more short-term swings, he believes the long-term outlook remains bright.
