Stocks Drop as Fed's Latest Projections Sink In

US stocks slumped after the Federal Reserve said it may not cut interest rates next year by as much as it earlier thought, regardless of how much Wall Street wants it. The S&P 500 fell 41.75 points, or 0.9%, to 4,402.20. The Dow Jones Industrial Average fell 76.85 points, or 0.2%, to 34,440.88. The Nasdaq composite fell 209.06 points, or 1.5%, to 13,469.13. The Fed held its main interest rate at its highest level in more than two decades, as was widely expected. Officials also indicated they may raise the federal funds rate once again this year, as the Fed tries to get inflation back down to its target of 2%, though Fed Chair Jerome Powell said it's close to hitting the peak, if not there already.

Perhaps more importantly for the market, Fed officials also suggested they may cut rates next year by only half a percentage point. Three months ago, they were penciling in a full percentage point of cuts in 2024. High rates tend to hit high-growth stocks particularly hard, and Big Tech companies were among the market's heaviest weights, the AP reports. Apple fell 2%, Microsoft fell 2.4%, and Nvidia fell 2.9%. Stocks of several companies who just recently sold their stock on public markets for the first time also fell. Instacart dropped 10.7% as it gave back some of its gains from its first day of trading as a public stock. Arm Holdings dropped 4.1%.

Stocks initially held relatively steady following the release of the Fed's forecasts, before sliding later in the afternoon. "As you move further and further away from the meeting, the message may sink in," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. "We very much expect the markets to be knocked a little bit off their axis by this." Powell, though, also stressed that forecasts could change as more data about inflation and the economy come in. "Forecasters are a humble lot, with much to be humble about," he said. Powell said the Fed has already moved rates up very high very quickly, which now gives it the ability to take more time before making upcoming moves.

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