U.S. Stocks Plunge After Federal Reserve Delivers First Rate Cut Since 2008

U.S. stocks plunged on Wednesday after the Federal Reserve wrapped up its long anticipated policy meeting by lowering interest rates for the first time since the financial crisis. Cryptocurrencies were unaffected by central-bank meddling, as bitcoin returned above $10,000 for the first time in five days.

Dow, S&P 500, Nasdaq Give Up Gains

All of Wall Street’s major indexes turned sharply lower shortly after 2:00 p.m. ET. The Dow Jones Industrial Average would eventually close down 333.75 points, or 1.2%, at 26,864.27. The blue-chip index was off by as much as 479 points.

Dow Jones Industrial Average plummets post-FOMC. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks declined 1.1% to close at 2,980.38. All 11 primary sectors recorded losses, with materials, technology and consumer staples falling more than 1%.

Meanwhile, the technology-focused Nasdaq Composite Index declined 1.2% to 8,175.42.

Federal Reserve Cuts Interest Rates

The Federal Reserve lowered interest rates on Wednesday for the first time since the financial crisis, setting the stage for a new era of ultra-loose monetary policy.

After the 25 basis-point reduction, the target for the federal funds rate now sits at 2% to 2.25%. A large minority of traders believed the Fed could lower rates by 50 basis points. They still hold the view that a second rate cut is coming in September.

“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent,” read the official Federal Reserve policy statement released at 2:00 p.m. ET.

The decision to lower rates was not unanimous: Kansas City Fed president Esther George and Eric Rosengren of the Boston Fed preferred to keep rates on hold.

$10,000 Bitcoin

For the first time since Saturday, bitcoin has catapulted back above $10,000, a move that seems to have sparked a broad rally for the digital asset market. The largest cryptocurrency peaked at $10,143.20 on Bitstamp for a gain of 5.7%. As of 4:00 p.m. ET, the BTC/USD exchange rate was up 4.3% at $10,006.

BTC/USD: Hourly chart. | Source: TradingView.

With the rally, BTC trade volumes surpassed $1 billion for the first time this week, according to Bitwise’s ‘real 10’ data feed. Unlike CoinMarketCap, Bitwise tracks volume data of ten verified exchanges.

Altcoins and tokens followed bitcoin higher, as the total market capitalization of all coins improved by $10 billion. The total market cap was last seen hovering north of $275 billion. Most of the top ten cryptocurrencies reported gains,with Litecoin and Ethereum among the best performers.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Charts via Yahoo Finance. 

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi