Dow Drops for Ninth Straight Day Amid Fed Decision Delay

U.S. stocks dropped on Tuesday with the Dow falling for a ninth consecutive session as investors stayed cautious before the Federal Reserve’s latest policy decision of the year. Economic data showed that retail sales in November were stronger than anticipated, due to strong purchases of motor vehicles.

It was an indication of solid consumer spending and how resilient the economy was. However, the positive data provided further fuel for market anxiety about the possible actions by the Fed to contain inflation. With the central bank preparing to make its policy stance known, investors are closely watching for signals that may influence the economic outlook heading into the New Year.

Policy and Rates of Fed

The investors were waiting for the Federal Reserve’s policy statement, which was expected to cut rates by 25 basis points. The attention was on the Fed’s summary of economic projections and Chair Jerome Powell’s comments, which could indicate the speed of rate cuts in 2025. With a strong economy and persistent inflation, the Fed may be cautious, especially with growth-boosting policies expected.

The Federal Reserve may slow down the pace of rate cuts with the resilient economy and persisting inflation. The growth-oriented policies of the new Trump administration are likely to rekindle inflationary fears. Such a cautious Fed is actually balancing economic momentum and likely price pressures within an ever-changing policy environment.

Uncertainty over the decision

Mr. Jason Ware, the Chief Investment Officer of Albion Financial Group, noted: “The market is uncertain at this point ahead of a Fed decision. Investors are wondering how to position themselves with the Fed’s SEP summary and Chair Jerome Powell’s press conference.” While widely expected, a 25-basis-point rate cut looms large, but commentary from Powell and details in the SEP are unknown. This brings along cautionary sentiments as participants in the market await the statement on the Fed’s plans and future economic conditions.

NASDAQ on the rise while Dow declines

It is seen that the Dow Jones Industrial Average declined by 267.58 points, or 0.61%, to 43,449.90, and the S&P 500 declined 23.47 points, or 0.39%, to 6,050.61, with the NASDAQ Composite sliding 64.83 points, or 0.32%, to 20,109.06. Though the NASDAQ had risen to an all-time high on Monday, and the S&P 500 is up more than 27% year to date, the Dow had its troubles. The index registered its ninth straight daily loss, a record losing streak since February 1978. It’s in uncertainty as investors fear what will happen after the policy announcement of the Federal Reserve. Some investors are also on the lookout for what the Federal Reserve Chair Jerome Powell would have to say in relation to the economic projection and possible future market trends.

Markets on Edge

The yields for Treasuries seesawed amid the wait for the “hawkish cut” by the Fed. Most of the S&P sectors were down at the close, including industrials, which were down 0.9%. Only consumer discretionary moved into the plus column as it jumped amid the jump in Tesla’s stock that is now up 3.6%. Both Mizuho and Wedbush have lifted the price targets for the electric vehicle maker to $515, buoying the shares amid declines across markets.

While the CBOE Volatility Index gained by 15.87, its highest level since November 21 of this year, according to Bloomberg, as market uncertainty ahead of the decision by the Fed increased, the small-cap Russell 2000 index, more sensitive to higher interest rates, declined by 1.2% amid this market volatility.

Market showing mixed signals as Pfizer on the rise

While Pfizer (PFE) gained 4.7% as the drugmaker forecasted 2025 earnings in line with expectations of analysts on Wall Street. Decliners outpaced advancers on the NYSE by a ratio of 2.77-to-1, while NASDAQ decliners led advancers by a 1.79-to-1 ratio. New highs for the S&P 500 included 11 new 52-week highs and 19 lows, while the NASDAQ Composite recorded 81 new highs and 197 new lows. Trading volume on U.S. exchanges was 16.17 billion shares, against a 20-day moving average of 14.11 billion shares. This kind of market activity was witnessed amid rising volumes.

Winding up

At the end we can conclude that the markets are poised ahead of the Fed’s critical policy decision that could bring some much-needed cheer, but mixed signals were reflecting investor caution ahead of this. The Dow Jones recorded its ninth successive loss, its longest streak since 1978, whereas NASDAQ and S&P 500 posted modest drops on resilient consumer spending data.

Speculation over rate cuts by the Fed and economic projections are fueling market volatility, where treasury yields are fluctuating and the CBOE Volatility Index is surging. Select stocks, such as Pfizer and Tesla, rose, but overall declines underscored uncertainty about the Fed’s next moves and their potential impacts on inflation, growth, and market stability heading into 2025.