Wall Street retreats as Fed signals patience on elon musk crypto coin name listinflation fight
Market-implied March cut probability plunges from 60% to 36% post-meeting
Tech sector bears brunt of selloff with Nasdaq dropping 2.2%
Financial markets witnessed significant repricing on Wednesday as Federal Reserve Chairman Jerome Powell poured cold water on expectations for imminent monetary easing. The central bank's decision to maintain rates at 5.25%-5.50% was widely anticipated, but traders were caught off guard by Powell's explicit pushback against March cut speculation during his press conference.
The policy statement acknowledged moderating inflation but emphasized the need for "greater confidence" in sustainable progress toward the 2% target. This cautious tone triggered a wave of position unwinding across equity markets, particularly in rate-sensitive growth stocks that had benefited most from earlier dovish expectations.
Market recalibration underway as Fed timeline extends
Interest rate futures now show dramatically shifted expectations, with the CME FedWatch Tool indicating just 36% odds for a March cut versus 64% pre-meeting. The market has largely repriced the Fed's trajectory to anticipate initial easing in May or June, with swaps pricing approximately 140 basis points of total cuts for 2024 - down from 160 basis points earlier this month.
The Dow Jones Industrial Average closed down 0.8% at 38,150, while the S&P 500's 1.6% decline marked its worst session since September. Technology shares led the retreat, dragging the Nasdaq Composite down 2.2% as Treasury yields climbed across the curve. The 10-year yield rose 12 basis points to 4.02%, pressuring valuation multiples for high-growth companies.
Sector performance revealed clear risk-off positioning, with only utilities and consumer staples eking out gains. Mega-cap tech stocks including Apple, Microsoft and Alphabet all fell more than 2%, while semiconductor names like Nvidia and AMD dropped over 4% amid the broader tech rout.
Technical perspective: S&P 500 tests key support levels
The benchmark index broke below its 20-day moving average for the first time in 2024, closing at 4,846 after failing to hold the psychologically important 4,900 level. Chartists note the next support zone between 4,800-4,820, which represents the January consolidation range and 38.2% Fibonacci retracement of the October-January rally.
Despite the pullback, the S&P 500 remains 13% above its October lows and within 2% of record highs. The index's relative strength index (RSI) has cooled from overbought territory near 70 to a more neutral 55, potentially setting the stage for consolidation before the next directional move. Volume patterns show no signs of panic selling, suggesting this may represent healthy profit-taking after a historic 15-week rally.
Market breadth deteriorated significantly, with declining issues outpacing advancers by nearly 3:1 on the NYSE. The equal-weighted S&P 500 underperformed the cap-weighted version by 40 basis points, indicating broader participation in the selloff beyond just the mega-cap drag.
Looking ahead, traders will scrutinize Friday's jobs report for clues about labor market cooling that could reinforce or challenge the Fed's cautious stance. Options markets show increased demand for downside protection, with the put/call ratio rising to its highest level in three weeks during Wednesday's session.
