Stock Market Today: World shares track Wall Street's selloff after Fed hints at 2 rate cuts in 2025

[December 19, 2024]  By ELAINE KURTENBACH

BANGKOK (AP) — World shares skidded Thursday after U.S. stocks tumbled as the Federal Reserve hinted it may deliver fewer rate cuts in 2025 than earlier thought.

The Fed cut its key rate by a quarter of a percentage point to between 4.25% and 4.5%, as expected. The Bank of England was expected to keep its policy rate unchanged Thursday, while the Bank of Japan opt kept its benchmark rate at 0.25%. That decision, which also was no surprise, pushed the dollar higher against the Japanese yen.

The dollar was trading at 157.04 yen, up 1.5% from 154.79 yen late Wednesday.

World markets fell, but generally by less than 2%.

In early European trading, Britain's FTSE 100 lost 1.2% to 8,102.36 and the CAC 40 in Paris fell 1.2% to 7,299.99. Germany's DAX was 1% lower, at 20,045.12.

The future for the S&P 500 gained 0.4% while that for the Dow Jones Industrial Average was 0.3% higher.

In Asia, Tokyo’s Nikkei 225 lost 0.7% to 38,813.58.

A weaker yen tends to push prices higher in Japan, which depends heavily on imports, and that in turn raises pressure on the Bank of Japan to raise rates. Analysts say they expect a BOJ rate hike in January, but also that the central bank is wary of big changes as it waits to see possible shocks from President-elect Donald Trump's policies on tariffs.

There are “high uncertainties” surrounding Japan's business outlook and prices and developments in foreign economies and commodity prices, the BOJ said in a statement.

Chinese markets also declined. The Hang Seng index fell 0.6% to 19,752.51, while the Shanghai Composite index dropped 0.4% to 3,370.03.

Australia's S&P/ASX 200 shed 1.7% to 8,168.20, while the Kospi in South Korea slipped 2% to 2,435.93. India's Sensex fell 1.2%.

In Taiwan, the Taiex lost 1%, while Bangkok's SET fell 1.5%.

On Wednesday, the S&P 500 fell 3%, just shy of its biggest loss for the year. The Dow lost 1,123 points, or 2.6%, and the Nasdaq composite dropped 3.6%.

A currency trader walks by the screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea, Thursday, Dec. 19, 2024. (AP Photo/Lee Jin-man)

The Russell 2000 index of small-cap stocks tumbled 4.4%.

Wednesday's rate cut was the third this year after the Fed began in September to lower rates from a two-decade high to support the job market. Wall Street loves easier interest rates, but the cut was already widely expected and investors were more focused on how much more the Fed will cut next year.

A lot is riding on it, particularly after expectations for a series of cuts in 2025 helped the U.S. stock market set an all-time high 57 times so far in 2024.

Fed officials released projections on Wednesday showing the median expectation among them is for two more cuts to the federal funds rate in 2025, or half a percentage point’s worth. That’s down from the four cuts expected just three months ago.

“We are in a new phase of the process,” Fed Chair Jerome Powell said.

Asked why Fed officials are looking to slow their cuts, he pointed to how well the job market is performing overall and how recent inflation readings have picked up.

Powell said some Fed officials, but not all, are also already trying to incorporate uncertainties inherent in a new administration coming into the White House. Worries are rising on Wall Street that President-elect Donald Trump’s preference for tariffs and other policies could further fuel inflation.

“When the path is uncertain, you go a little slower,” Powell said. It’s “not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.”

In other dealings early Thursday, U.S. benchmark crude oil gave up 4 cents to $69.98 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, fell 5 cents to $73.34 per barrel.

The euro rose to $1.0416 from $1.0355.

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