On December 18, local time, the Federal Reserve's decision to cut interest rates by 25 basis points sent shockwaves through the U.Sstock marketsBy the time the markets closed, the Dow Jones Industrial Average had plunged more than a thousand points, down 2.58%, marking its tenth consecutive day of decline, a first since 1974. The Nasdaq also took a significant hit, plummeting over 700 points for a loss of 3.56%, while the S&P 500 dropped 2.95%. Analysts attributed the turmoil largely to the Fed's disappointing outlook on interest rates, which further pushed the Dow into historical lows.

In the early hours of December 19, the Federal Reserve wrapped up a two-day policy meeting with an announcement that it would lower the federal funds rate by 25 basis points, adjusting the target range to 4.25% - 4.50%. This marked a significant shift in monetary policy amid ongoing economic uncertainties

The updated Federal Reserve dot plot indicated expectations for two additional rate cuts in 2025, each by 25 basis pointsThe projections for the same year in September had anticipated four cutsIn addition, the Fed expects to cut rates twice again in 2026, maintaining its previous expectations.

At a press conference, Fed Chair Jerome Powell emphasized that the central bank has lowered rates by a full percentage point from peak levels, allowing for a more relaxed policy stance that would pave the way for careful consideration of future rate adjustmentsHe spotlighted the rising inflation expectations and remarked that it would be premature to draw conclusions regarding tariff impacts until more details are known about the countries involved and the scale and duration of such tariffsPowell also affirmed the necessity of maintaining restrictive policies to achieve a 2% inflation target, a goal that could take an additional year or two to meet

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Notably, he clarified that the Fed is neither permitted to hold Bitcoin nor inclined to change existing regulations on the cryptocurrency.

Earlier on September 19, the Federal Reserve had implemented a substantial rate cut of 50 basis points, the first reduction of the year and the first in more than four yearsThis was followed by another 25 basis point reduction on November 8, resulting in a target rate of 4.50% - 4.75%. The Financial Times previously noted that the direction of interest rates in the U.Sfor 2025 remains uncertain, highlighting the Fed's dual mandate to control inflation close to 2% while ensuring a healthy labor market.

The reaction from the financial markets was immediate, as major technology stocks in the U.SnosedivedTesla led the decline with an over 8% drop, followed by Amazon, which fell more than 4%. Microsoft and Google both dipped over 3%, while Facebook and Apple saw declines of over 3% and 2% respectively

Furthermore, Nvidia also lost over 1% by the close.

Financial giants like American Express and Goldman Sachs dropped more than 4%, leading the charge downward for the DowOther notable decliners included JPMorgan Chase, Home Depot, Caterpillar, Travelers Companies, S&P Global, and Sherwin-Williams, all falling over 3%.

Within the context of Chinese stocks listed in the U.S., the overall trend was also bleak, with the Nasdaq Golden Dragon China Index depreciating by 2.41%. Individual stocks demonstrated stark variability: for instance, WeDoctor fell over 10%, followed by Century Internet with a decline of over 9%, and Tiger Brokers dropping more than 8%. In contrast, JD Health experienced a notable increase of over 12%, while Li Auto gained over 1%.

Across the Atlantic in Europe, most major indices managed to rise, although the German DAX index fell marginally by 0.02%. The UK's FTSE 100 increased by 0.05%, while France's CAC40 climbed by 0.26%, and the Euro Stoxx 50 rose by 0.3%. Analysts from Reuters attributed these gains to tech stocks and Renault, the French automotive manufacturer, even though the overall increases were somewhat muted due to caution prevailing ahead of the Fed's policy decision.

International oil prices saw an increase on December 18. By the end of trading, light crude futures for January 2025 delivery settled at $70.58 a barrel, up 50 cents, a 0.71% rise; meanwhile, London’s Brent crude for February delivery rose 20 cents to $73.39 a barrel, up 0.27%.

In stark contrast, precious metals witnessed a significant drop, with COMEX gold falling by 2.05% to $2,607.3 per ounce and COMEX silver plunging 3.22% to $29.925 per ounce, slipping below the $30 mark.

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