Wall St rebounds after Fed’s hawkish cut triggers selloff By Reuters

By Medha Singh and Purvi Agarwal

(Reuters) – Wall Street’s main indexes gained some ground on Thursday after the Federal Reserve’s forecast of fewer-than-expected interest rate cuts and higher inflation next year unnerved some investors and sent U.S. stocks tumbling.

The benchmark was last up 0.3%, paring most of its gains in the first hour of the trading session, as rising U.S. Treasury yields weighed in. The U.S. 10-year yield hit a fresh 6-1/2-month high of 4. 57% after favorable economic data. [US/]

“The stock market is going to take all its cues from the bond market moving forward,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.

“I’m going to look at the 10-year (yield) and hope it doesn’t break the 4.6% level.”

The Fed said on Wednesday it expects to make just two 25-basis-point cuts in 2025, half a percentage point less than the new Trump administration’s September forecast, sending the three major U.S. stock indexes to their steepest daily declines since August.

Traders now see just a quarter-point rate cut by mid-2025 and a total of two rate cuts by the end of the year, compared with last week’s expectation of three rate cuts.

“We could see the market struggle a little bit, mainly because there’s uncertainty about how inflation will hold and where rates will be a year from now,” Cipolloni said.

Bank shares rose 1.3% as rising yields boosted lenders’ profitability, while megacap and growth stocks gained some ground, with Nvidia ( NASDAQ: ) adding 3.2% and Amazon.com (NASDAQ: ) by 2.1% respectively.

At 11:22 a.m. ET, it was up 257.46 points, or 0.61%, at 42,584.33 and was on track to end its ten-session losing streak, the longest since 1974.

The S&P 500 added 33.70 points, or 0.57%, to 5,905.86, and rose 129.31 points, or 0.67%, to 19,522.01.

The CBOE volatility index, a gauge of Wall Street’s fears, eased to 20.56 after hitting a four-month high a day earlier.

The benchmark S&P 500 hit a near one-month low on Wednesday as investors adjusted their risk exposure to reflect the impact of higher borrowing costs in 2025.

The hawkish shift from the Fed comes just three months after the U.S. central bank kicked off a cycle of monetary easing with a larger-than-usual 50 basis point rate cut that boosted risk appetite and helped push Wall Street to record highs.

Meanwhile, data showed the US economy grew faster than previously estimated in the third quarter, while weekly jobless claims fell more than expected last week.

Micron (NASDAQ: ) fell 15.5% after missing quarterly revenue and profit guidance.

Home builder Lennar (NYSE: ) fell 5.5% after reporting fourth-quarter results that fell short of estimates, undercutting the PHLX housing index by 2.1%.

Bearish issues outnumbered advancers by a 1.34-to-1 ratio on the NYSE and 1.04-to-1 on the Nasdaq.

The S&P 500 posted two new 52-week highs and 36 new lows, while the Nasdaq Composite posted 18 new highs and 191 new lows.