The Dow Jones Industrial Average plunged on Wednesday, closing by over 1,100 points, or 2.6%, following a disappointing outlook from the Federal Reserve. This sharp decline extended the blue-chip index’s losing streak to 10 consecutive days—the longest streak since 1974 when Gerald Ford was the U.S. president.

Fed’s Projections Trigger Market Selloff

The significant drop in the Dow came after the Federal Reserve indicated that it now expects only two interest rate cuts in 2025, down from its earlier projection of four. Additionally, the Fed warned that inflation will likely remain above its target range longer than initially anticipated. This revised outlook unnerved investors, who had hoped for more aggressive rate cuts to ease monetary conditions.

Although the Fed’s decision to cut rates by a quarter percentage point on Wednesday aligned with expectations, the statement accompanying the decision painted a “hawkish” outlook. This signaled that the central bank remains cautious about quickly reducing rates, dampening market sentiment.

Market reactions were immediate, with the S&P 500 falling by 3% and the Nasdaq Composite tumbling by 3.6%. Analysts attributed the declines to growing uncertainty about the Fed’s future monetary policy stance.

Dow’s Longest Decline in Nearly Five Decades

The Dow Jones’s 10-day slide marks its longest losing streak since September to October 1974, when the index fell for 11 straight sessions. Despite this recent downturn, the Dow’s total decline over the 10 days amounts to less than 6%, suggesting a relatively moderate correction compared to past market slumps.

Wednesday’s plunge stands out because the broader market had remained relatively strong during the earlier days of the Dow’s decline. Before this sharp selloff, other indexes, such as the S&P 500 and Nasdaq, were trading near record highs.

Shifting Investor Sentiment

Investor sentiment shifted dramatically following Federal Reserve Chair Jerome Powell’s press conference. On Tuesday, traders had priced in a 98% chance that the Fed would cut rates again at its January meeting. However, after Powell’s remarks, the likelihood of a January rate cut dropped to just 6%, according to fed funds futures data.

Market analysts noted that investors were disappointed by the Fed’s cautious stance on future rate cuts. The prospect of tighter monetary conditions for an extended period has sparked concern among traders, leading to widespread selling across both stocks and bonds.

Dow’s Decline Driven by Key Stocks

Several individual stocks contributed to the Dow Jones’s recent slide. UnitedHealth Group, which has seen its shares decline by 15% this month, has been a significant drag on the index. Despite a slight rebound of 3.3% on Wednesday, the insurer’s overall losses have weighed heavily on the Dow.

Similarly, Nvidia, the U.S. chipmaker that joined the Dow in November, has also played a role in the decline. While Nvidia’s stock has surged more than 180% this year, it has dropped about 5% in the past month, adding to the pressure on the 30-stock index.

A Broader Perspective

Despite the ongoing losing streak, the Dow Jones remains up 14% for the year, gaining more than 5,000 points in 2024. Markets had initially surged earlier this year, bolstered by election results that avoided prolonged recounts or legal battles. Investors were also optimistic about the potential for reduced regulations and tax cuts under the new administration.

However, the recent selloff highlights lingering concerns about the Federal Reserve’s ability to balance inflation control with economic growth. As markets continue to digest the central bank’s updated projections, volatility is likely to persist in the short term.