ASX tumbles after Wall Street plunge; $A slumps to two-year low

Energy company Deep Yellow stock fell 10.7 per cent after telling shareholders it wouldn’t make a final investment decision on its Tumas uranium mine in Namibia until early March amid delayed costings and quotes for equipment and construction.

On Wall Street overnight, US stocks sank to their second-worst loss of the year after the Federal Reserve signalled that it may deliver fewer interest rates cuts in 2025 than earlier thought.

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The S&P 500 dropped 2.9 per cent to pull further from its all-time high set a couple of weeks ago. The Dow Jones sank 2.6 per cent, or more than 1100 points, and the Nasdaq composite dropped 3.6 per cent.

The Fed cut its main interest rate for the third time this year, but that was widely expected. More attention was on projections Fed officials released about where they see rates heading next year. The median forecast is calling for just two cuts, down from four just three months ago. Treasury yields rose.

The US dollar soared, sending other major currencies like the Aussie dollar lower.

The bigger question centres on how much more the Fed will cut next year. A lot is riding on it, particularly after expectations for a series of cuts in 2025 helped the US stock market set an all-time high at least 57 times in 2024.

‘When the path is uncertain, you go a little slower … [it’s] not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.’

Fed chair Jerome Powell

Fed officials released projections showing the median expectation among them is for two more cuts to the federal funds rate in 2025, or half a percentage point’s worth. That’s down from the four cuts expected just three months ago.

“We are in a new phase of the process,” Fed Chair Jerome Powell said after the central bank quickly eased its main interest rate since September by a full percentage point to a range of 4.25 per cent to 4.50 per cent.

Asked why Fed officials are looking to slow their cuts, Powell pointed to how the job market looks to be performing well overall and how recent inflation readings have picked up. He also cited uncertainties that will require policymakers to react to upcoming, to-be-determined changes in the economy.

While lower rates can offer a boost to the economy by making it cheaper to borrow and boosting prices for investments, they can also offer more fuel for inflation.

Powell said some Fed officials, but not all, are also already trying to incorporate uncertainties inherent in a new administration coming into the White House. Worries are rising on Wall Street that President-elect Donald Trump’s preference for tariffs and other policies could further juice inflation, along with economic growth.

“When the path is uncertain, you go a little slower,” Powell said. It’s “not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.”

One official, Cleveland Fed President Beth Hammack, thought the central bank should not have even cut rates this time around. She was the lone vote against Wednesday’s rate cut.

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The reduced expectations for 2025 rate cuts sent US Treasury yields rising in the bond market, squeezing the stock market.

The yield on the 10-year Treasury rose to 4.50 per cent from 4.40 per cent late Tuesday, which is a notable move for the bond market. The two-year yield, which more closely tracks expectations for Fed action, climbed to 4.35 per cent from 4.25 per cent.

Nvidia, the superstar responsible for a chunk of Wall Street’s rally to records in recent years, fell 1.1 per cent to extend its weeks-long funk. It has dropped more than 13 per cent from its record set last month and fallen in nine of the last 10 days as its big momentum slows.