Tesla shares experienced a significant decline of 8.3% on Wednesday, leading a broad downturn in the U.S. stock market following the Federal Reserve’s latest policy updates. Broadcom also faced a steep drop, with its shares falling 6.9%. Meanwhile, NVIDIA despite an early surge of over 5% ended the day down 1.1%.
Both Tesla and Broadcom had seen notable gains in recent weeks, but investor sentiment shifted sharply after the Federal Reserve’s announcement of a 0.25% interest rate cut. While the reduction brought the federal funds rate to a target range of 4.25%-4.50%, the central bank’s signals of a slower pace for future rate decreases dampened market optimism.
The Federal Open Market Committee (FOMC) emphasized that upcoming rate decisions would depend on economic data, reflecting a cautious stance. This approach spurred a rise in Treasury yields, which in turn pressured equity markets across the board.
Adding to the market’s unease was the Fed’s Summary of Economic Projections (SEP), which revealed a scaled-back outlook for rate cuts in 2025. The SEP now anticipates just two 25 basis point reductions that year, compared to the previous forecast of four. Projections for subsequent years also adjusted, with two cuts expected in 2026 and one in 2027, bringing the terminal rate to 3.125%, up from the earlier estimate of 2.875%. Additionally, the Fed revised its longer-run rate forecast to 3.0%.
Investors also reacted to the updated inflation and economic growth projections. The Fed now expects core and headline inflation to remain elevated through 2026, while unemployment forecasts for 2024 and 2025 have been revised downward. GDP growth projections for the same years were raised, adding complexity to the economic outlook.
Wells Fargo economists noted the wide variation in the Fed’s dot plot for 2025, suggesting potential uncertainty about the policy priorities of the next administration. This uncertainty, coupled with the Fed’s cautious tone, has left markets on edge, contributing to the recent declines in major tech stocks.
