The Dow Jones Industrial Average staged a rapid reversal on Wednesday, touching a record high earlier in the session before rolling over after Federal Reserve Chair Jerome Powell indicated that the central bank might not cut interest rates again in 2025.
The blue-chip index closed down 74.37 points, or 0.2%, to 47,632.00, while the S&P 500 ended a handful of points lower to 6,890.59. The Nasdaq Composite outperformed, rising 0.55% to a fresh record close of 23,958.47, propped up by a rise in Nvidia. The Dow was up as much as 334 points, touching a new all-time high at one point before turning lower.
The Fed lowered its benchmark overnight borrowing rate by a quarter percentage point at the conclusion of its two-day policy meeting Wednesday afternoon, putting it in a range of between 3.75% to 4%. This marks the second time this year that the central bank has slashed rates. Prior to the decision, investors were betting on another quarter-point cut at the Fed's December meeting.
But Powell knocked down market expectations after saying that there were "strongly differing views about how to proceed in December" during this meeting's committee discussions. "A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it," he said.
The 10-year Treasury yield jumped back above 4% on Powell's comments about the December meeting. Stocks that stand to lose from higher rates led the rollover in the market. Consumer stocks like Costco and McDonald's declined. Visa and Mastercard also fell.
All in all, Powell did indicate that what to do at the December meeting was still in the air, adding that inflation was not too far from the Fed's target.
"Powell is reflecting the tension on the Fed between those who favor more aggressive easing and those who are concerned that inflation remains too high, even as the labor market weakens," said Michael Rosen, chief investment officer at Angeles Investments. "Our view has been that the market has been too aggressive in pricing in the pace and magnitude of future cuts. Inflation is elevated above the Fed's target, and we see monetary policy as moderately loose, with nominal rates below nominal GDP growth."
Megacap technology name Nvidia clung to gains Wednesday, advancing 3.1%. The artificial intelligence chip darling's market capitalization had rocketed up above $5 trillion in the session, the first time a U.S. company reached such a valuation. The stock notched a five-day winning streak as well. The move comes just a day after the company announced an array of new deals, especially one that involves the chip giant taking a $1 billion stake in Finnish networking company Nokia.
Five fellow "Magnificent Seven" companies are set to report this week. They're expected to continue spending on building data centers, but any disappointment from the megacap behemoths could hurt the broader market. Alphabet, Meta Platforms and Microsoft are due to report after the close on Wednesday. Apple and Amazon post results on Thursday.
Investors are additionally awaiting what comes of President Donald Trump's meeting with Chinese President Xi Jinping in South Korea, though trade tensions between the U.S. and China already appear to have alleviated after progress over the weekend. Trump has said that he expects to cut fentanyl-related tariffs on China, which sit at 20%.
