Fed Caution Sparks Market Plunge: Stock Indexes Erase Trump-Era Gains Amid Rate Cut Uncertainty

US Stock Market Erases Over Half of Post-Trump Election Gains

In a significant market shift, more than half of the stock market’s gains since former President Donald Trump’s election have been erased. This downturn came after Federal Reserve Chair Jerome Powell announced a cautious approach to interest rate cuts, coupled with strong economic data that has led investors to question the necessity of a December rate reduction.

The major US indexes experienced a sharp sell-off, with the tech-heavy Nasdaq leading the declines. The S&P 500 and Dow Jones Industrial Average also saw substantial losses. Investors have rapidly adjusted their expectations for a December rate cut, with probabilities dropping from 80% to 58%.

Recent US economic data has shown unexpected strength, particularly in retail sales and jobless claims figures. These positive indicators have influenced the Federal Reserve’s stance on rate cuts, contributing to the market’s reassessment.

The shift has raised concerns among investors about Trump’s long-term impact on the market, especially regarding trade policies and potential inflation. The initial focus on tax cuts and deregulation that drove market optimism is now overshadowed by worries over rate hikes.

At the close of trading, the S&P 500 was down 1.3% at 5,870.62, while the Dow Jones fell 0.7% to 43,444.99. The Nasdaq composite experienced the most significant decline, dropping 2.2% to close at 18,680.12.

In the commodities market, West Texas Intermediate crude fell to $67.01 a barrel, and Brent crude decreased to $71.11 a barrel. Gold prices saw a slight decrease, while the 10-year Treasury yield experienced a minor increase. In contrast, Bitcoin saw an increase in value.

As the market continues to react to economic indicators and policy decisions, investors remain watchful of potential impacts from Trump’s policies, including his housing plans and appointments in key sectors such as healthcare.