Overnight U.S. Stocks | The Federal Reserve's hawkish rate cut severely impacted U.S. stocks, with the Dow Jones Industrial Average experiencing its longest consecutive decline in 50 years, and Tesla falling over 8%

According to Zhitong Finance, on Wednesday, Federal Reserve Chairman Jerome Powell stated that the threshold for further rate cuts in the future may be higher. The three major indices fell sharply, with the Dow Jones Industrial Average plunging over 1,100 points, marking its tenth consecutive trading day of decline, the longest losing streak since 1974.

【U.S. Stocks】 At the close, the Dow fell 1,123.03 points, a decrease of 2.58%, to 42,326.87 points; the Nasdaq fell 716.37 points, a decrease of 3.56%, to 19,392.69 points; the S&P 500 index fell 178.45 points, a decrease of 2.95%, to 5,872.16 points. Tesla (TSLA.US) fell over 8%, Broadcom (AVGO.US) fell 6.9%, and Nvidia (NVDA.US) fell 1%. The Nasdaq Golden Dragon China Index closed down 2.4%, with Alibaba (BABA.US) down 24%.

【European Stocks】 The German DAX 30 index fell 2.99 points, a decrease of 0.01%, to 20,250.70 points; the UK FTSE 100 index rose 2.46 points, an increase of 0.03%, to 8,197.66 points; the French CAC 40 index rose 18.92 points, an increase of 0.26%, to 7,384.62 points; the Euro Stoxx 50 index rose 15.17 points, an increase of 0.31%, to 4,957.75 points; the Spanish IBEX 35 index rose 18.84 points, an increase of 0.16%, to 11,618.94 points; the Italian FTSE MIB index rose 84.76 points, an increase of 0.25%, to 34,400.00 points.

【Asia-Pacific Stock Markets】 The Nikkei 225 index fell 0.72%, the Jakarta Composite Index in Indonesia fell 0.7%, and the KOSPI index in South Korea rose over 1.1%.

【Cryptocurrency】 There is ongoing debate about whether the incoming Trump administration will establish a Bitcoin reserve. Federal Reserve Chairman Powell stated that the Fed has no intention of holding Bitcoin. Powell said at a press conference following the FOMC meeting, "We are not allowed to hold Bitcoin." Regarding the legal issues of holding Bitcoin, Powell stated, "This is something for Congress to consider, but we have no intention of seeking to change the law."

【Gold】 Spot gold fell below the $2,600 per ounce mark for the first time since November 18, with a cumulative decline of $37 following the Fed's decision, a daily drop of 1.73%.

【Crude Oil】 The price of West Texas Intermediate (WTI) crude oil futures for January delivery rose by 50 cents, an increase of 0.71%, to $70.58 per barrel. The price of Brent crude oil futures for February delivery on the Intercontinental Exchange rose by 20 cents, an increase of 0.27%, to $73.39 per barrel.

【Foreign Exchange】 The Federal Reserve has revised its policy expectations for 2025 to a hawkish stance, driving the dollar to rebound. In recent trading, the dollar rose 1.1% against the euro, 0.8% against the yen, 0.9% against the pound, and 1.6% against the Australian dollar. In the futures market, traders now believe there is about a 57% chance that the Fed will cut rates one to two more times next year (hawkish), up from 38% before the decision [Macroeconomic News]

The Federal Reserve announces a 25 basis point rate cut. The Federal Reserve has lowered the benchmark interest rate by 25 basis points to 4.25%-4.50%, marking the third consecutive rate cut, in line with market expectations. The last cut was in November, also by 25 basis points. In a subsequent press conference, Federal Reserve Chairman Jerome Powell stated that the threshold for further rate cuts may be higher after Wednesday's reduction. "With today's action, we have lowered the policy rate by a full 100 basis points from its peak, and our policy stance is now significantly less restrictive. Therefore, we can be more cautious when considering further adjustments to the policy rate." In response to questions about cryptocurrencies, Powell stated that under existing legislation on Capitol Hill, the Federal Reserve is not allowed to hold Bitcoin. The Federal Reserve is not seeking to change the law to be able to hold Bitcoin.

Powell: More progress on inflation is needed before further rate cuts. Federal Reserve officials have lowered the benchmark interest rate for the third consecutive time but have tempered their expectations for the number of rate cuts in 2025, indicating a more cautious approach to further reducing borrowing costs. In a press conference following the Federal Reserve's decision, Powell told reporters, "With today's action, we have lowered the policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive." "Therefore, we can be more cautious when considering further adjustments to the policy rate." Nevertheless, Powell added that rates are still effectively suppressing economic activity, and the Federal Reserve is "on track to continue lowering rates." However, he stated that officials must see more progress on inflation before further rate cuts.

Analysts: The possibility of a rate cut in January is not completely ruled out given the massive federal deficit. AJ Bell Investment Director Russ Mould: agrees with the market expectation of a 25 basis point rate cut at this Federal Reserve meeting. However, the Federal Reserve's economic outlook may indicate only two rate cuts next year. The Federal Reserve will meet again next month, just over a week after Trump's inauguration; is the possibility of a rate cut in January completely ruled out? I wouldn't say so. The Federal Reserve is known for "relying on data" and is committed to its dual mandate of inflation and employment. However, behind Powell, the massive federal deficit means $1 trillion in interest payments each year, which is putting pressure on U.S. economic growth. If interest expenses can be reduced by lowering rates, it would be beneficial for the U.S. and for President-elect Trump.

Economists: The Federal Reserve is expected to cut rates by another 75 basis points next year. Kathy Bostjancic, Chief Economist at Nationwide Life Insurance Company, stated that next year's focus will be on Trump. Based on our forecasts of potential anti-inflation trends (especially in the service sector), we expect the Federal Reserve to cut rates by another 75 basis points next year. However, depending on the extent of tariff increases and specific import targets, overall inflation may be higher than our baseline forecast, which could lead to the Federal Reserve's rate cuts being less than we expect Trump and Musk oppose spending bill, House Speaker proposes "Plan B." According to foreign media reports, U.S. House Speaker Mike Johnson, a Republican, is considering a "Plan B" to fund the government before the Friday deadline for a government shutdown, as Republicans both inside and outside Congress, including those from Trump's team, are criticizing his spending plan. Trump earlier expressed to a Fox News host that he is completely opposed to the continuing resolution spending bill. This aligns with the views of "America First buddy" Musk, who stated that any lawmaker supporting the bill should step down. Two informed sources indicated that the alternative Johnson is considering is a "clean" continuing resolution bill. This would require abandoning additional provisions included in the initial 1,500-page spending plan negotiated by congressional leaders, including disaster relief and economic aid for farmers.

U.S. third-quarter current account deficit hits record high, economists warn of double deficit threat. The U.S. Bureau of Economic Analysis reported on Wednesday that the current account deficit in the third quarter increased by $35.9 billion, a rise of 13.1%, reaching a record high of $310.9 billion. The current account balance measures the flow of goods, services, and investments in and out of the United States. Economists surveyed by Reuters had previously predicted a current account deficit of $284 billion. The third-quarter current account deficit was equivalent to 4.2% of Gross Domestic Product (GDP), the highest since the first quarter of 2022. In the third quarter of 2006, the deficit reached 6.3% of GDP, when the real estate market boom began to fade. Given the dollar's status as a reserve currency, the large current account deficit currently has little impact on the dollar, but economists warn that this could change if the trend continues. Paul Ashworth, Chief North America Economist at Capital Economics, stated: "A new element of this theme is that the U.S. can no longer rely on generating significant income surpluses to help control the deficit." "The result is that we should be concerned about the dual issues of government deficits and external deficits, as both carry long-term risks of developing into a full-blown debt or currency crisis."

【Stock News】

Merck (MRK.US) spends up to $2 billion to acquire global rights to a weight loss drug from Hansoh Pharmaceutical. Merck has acquired a potential drug in the emerging weight loss market for up to $2 billion. Merck stated in a press release on Wednesday that under the terms of the agreement, the company will obtain global exclusive rights to develop, manufacture, and commercialize HS-10535, an experimental oral drug targeting GLP-1 receptors from Chinese pharmaceutical company Hansoh Pharmaceutical.

Ford (F.US) to replace quality chief to reduce warranty costs. Ford Motor Company confirmed on Wednesday that it will appoint a new quality chief as the company seeks to reverse its industry-leading recall record and reduce warranty costs. Ford will transfer control of the quality team from Jim Baumbick to a yet-to-be-named new leader, while Baumbick will be responsible for electric vehicle projects