Expectations of Fed cuts were the killer blow to the markets

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Reduce now, but less in the future
US Federal Reserve Interest rates lowered by 25 basis points on Wednesday, bringing the overnight borrowing rate to a target range of 4.25% to 4.5%. In the Fed's dot chart indicating interest rate expectations in the coming years, the central bank mostly indicated Only two price reductions for 2025This is lower than the four cuts previously expected in September.

Sharp sell-offs in the markets
American markets It sold off sharply on Wednesday. the Dow Jones Industrial Average The stock lost more than 1,000 points, falling 2.58% for the 10th straight day of losses. the Standard & Poor's 500 Decreased 2.95% Nasdaq Composite Sunk 3.56%. Pan-European Stokes 600 – any Trading has ended Before the Fed’s decision – added 0.15%.

Tesla shares reversed
Tesla Shares fell 8.3% on Wednesday The most severe fall Since Donald Trump won the US presidential election in November, there have been huge losses in the broader market. While shares are still up 75% since the election on Nov. 5, the company's shares appear to be “widely disconnected…from fundamentals,” Barclay analysts wrote in a report Wednesday.

Disappointing guidance from Micron
shares Micron It fell more than 15% in extended trading after the company gave Steering is much weaker than expectedalthough it exceeded expectations for fourth-quarter earnings. For the current quarter, Micron expects revenue to reach about $7.9 billion. This is well below the $8.98 billion that analysts had expected, according to LSEG.

(PRO) Why the markets were so disappointed
The stock market took a hit after digesting the Federal Reserve's forecast that monetary policy in 2025 will remain tighter than previously expected. CNBC's Sarah Main asks why Investors were very disappointedWhat do market observers think about the Fed's decision?

But investors were already confident of the Fed's cut on Wednesday. Before the Fed's December meeting concluded, the futures market indicated a 98% chance of a 25 basis point cut, according to the Fed's report. CME FedWatch tool. This means that investors have already priced in the benefits of a rate cut into stocks. In other words, yesterday's cut will not have a significant impact on stock prices. Investors may have been expecting more optimism than that single cut in interest rates. Just a day ago, investors were betting on an 81.6% chance that the Fed would cut interest rates by another 25 basis points in January.

But Federal Reserve Chairman Jerome Powell crushed that hope.

“With today’s action, we have lowered interest rates by a full percentage point from their peak, and our policy stance is now significantly less restrictive,” Powell said. His press conference after the meeting. “We can therefore be more cautious as we consider further adjustments to our interest rate.”

The possibility of a 25-point rate cut next month has evaporated to just 6.4%, according to the futures market, after the Federal Reserve released its updated chart indicating just two cuts for 2025.

It is this massive paradigm shift – from hopes that the Fed will go all-in on cuts to the fact that it may take its foot off the gas pedal – that is sending tremors through markets.

In other words: It's like waking up in anticipation of a gift on Christmas Day, only to find yourself deprived of gifts. This disappointment wouldn't happen at any other time of the year.

As David Russell, global head of market strategy at TradeStation, puts it, “Goodbye hole punch. No Christmas cheer from the Fed.”

— CNBC's Daria Mercado, Jeff Cox, Yun Li, Brian Evans and Lisa Kailay Hahn contributed to this report.