Markets Dealing With Aftermath of Fed
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Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. Here is Schwab's early look at the markets for Thursday, December 19th. A day after stocks in the U.S. plunged, investors are preparing to learn whether the selling pressure will continue for another session or if equities can mount a recovery.

On Wednesday, the major indexes closed sharply lower as traders reacted to news that the Federal Reserve might not deliver the degree of rate easing in 2025 that they had hoped to see. Although stocks had been higher before the conclusion to the Fed's last meeting of 2024, the indexes reversed course and slid once traders digested news that only two rate cuts might be implemented next year.

The S&P 500 lost 178.45 points or 2.95% to 5,872.16 when trading had ended, while the Nasdaq Composite fell 716.37 points or 3.56% to 19,392.69.

The Dow Jones Industrial Average dropped 1,123.03 points or 2.58% to 42,326.87 and the Russell 2000 gave back 102.57 points or 4.39% to 2,231.51. For the Dow, it was its 10th straight decline.

Meanwhile, the SIBO Volatility Index, or VIX, surged 74% to 27.62. Before the Fed news, the VIX had been lower and was at 15.2. On the bond side, the 10-year Treasury yield rose, adding 12 basis points to 4.51% at 4 p.m. ET.

Fed policymakers, as expected, reduced interest rates by a quarter point for the third cut in 2024, taking the new Fed funds target rate down to 4.25% to 4.5%. Since that move wasn't a surprise, investors quickly turned their attention to what the future might hold for rates. And when the Fed signaled that only two more reductions were likely to occur in the year ahead, the negative reaction on Wall Street was swift and severe.

Notably, one FOMC participant voted against lowering rates this week, preferring instead that rates be maintained at the prior band. The odds of no change in rates at the January FOMC meeting rose to 91.4% following the Fed's remarks, up from 78.8% beforehand, according to the CME FedWatch tool. January meeting will be the first of eight FOMC gatherings scheduled to take place in 2025.

Back to the present, the market will have a few noteworthy items over the next few hours. The final third quarter reading for U.S. gross domestic product is expected to arrive before trading begins. GDP is expected to be up at an annualized rate of 2.8%. Later in the morning, existing home sales are due with a consensus estimate for an annual rate of 4.1 million.

In addition, earnings reports are expected from several companies, including Nike, FedEx, CarMax, Darden Restaurants, and ConAgra. This has been the Schwab Market Update podcast.

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