The global markets are undergoing turbulence!

Last night, the Dow Jones Industrial Average plummeted for the tenth consecutive trading dayThis marks the longest losing streak since October 1974. By the end of the day, the Dow had dropped 1123.03 points, a decrease of 2.58%. Meanwhile, the S&P 500 index fell by 2.95%, and the Nasdaq Composite Index dipped by 3.56%, with further losses by closing time.

European and Asia-Pacific stock index futures also saw significant declines, while commodities such as gold and oil fell collectively

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In the last 24 hours, a staggering 253,601 investors faced liquidation, amounting to a total loss of $702 million.

In a shocking turn of events, at 3 a.mBeijing time on December 19, the Federal Reserve announced a 25-basis-point cut to the benchmark interest rate, lowering the federal funds target range from 4.5%-4.75% to 4.25%-4.50%. Following the Fed's initiation of a monetary easing cycle in September 2024, this marked the third consecutive rate cut, totaling a 100 basis-point reductionNevertheless, Fed Chairman Powell's hawkish remarks seem to have triggered a wave of sell-offsWhat will be the real impact of these decisions?

Notably, on the morning of December 19, the Hong Kong Monetary Authority also announced a 25-basis-point cut to its benchmark interest rate, bringing it down to 4.75%.

The plunge has left many in a state of shock.

Last night was historic for the U.S

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stock marketAt the end of trading, all three major indices experienced unprecedented dropsThe Dow fell by 1123.03 points, representing a decrease of 2.58%, which is the largest drop since AugustThis is also the second time this year that the Dow lost over 1000 points in a single trading dayThe S&P 500 index dropped 2.95%, and the Nasdaq Composite Index fell 3.56%. The Dow has now witnessed its longest streak of losses in over four decades.

Across various sectors, all 11 major sectors of the S&P 500 saw declines, with real estate and consumer discretionary taking the hardest hits.

At the same time, the U.Sdollar index surged by 1.22%, breaking above 108. The yield on the 10-year U.S

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Treasury bond rose by nearly 12 basis points to 4.504%, hovering around that crucial 4.5% threshold during afternoon tradingThe two-year Treasury yield surged by over 10 basis points, reaching 4.348%.

In Canada, the main stock index experienced its largest drop in over ten monthsThe Toronto Stock Exchange’s S&P/TSX composite index closed down 562.71 points, ending at 24,557 points — a decline of 2.2%, marking the lowest closing level since November 5. The yield on Canada’s 10-year bond increased by 8.2 basis points to 3.224%, in line with the trajectory of U.SbondsEvery top sector faced losses, with technology stocks declining by 4.5%, and e-commerce company Shopify Incplummeting by 7.3%. Major stock index futures in Europe and the Asia-Pacific region similarly fell across the board, with commodities like gold and oil showing weakness.

Division of opinion remains.

Clearly, Wall Street is skeptical

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According to the Federal Reserve's futures tracking tool from the Chicago Mercantile Exchange (CME), the probability of another rate cut at the Fed's next policy meeting in January has now dropped to below 10%. "New bond king" Jeff Gundlach suggests that if energy prices surge significantly, we might not witness any Fed rate cuts until 2025.

However, some institutional investors point out another perspective, noting that the U.Seconomy remains robust, a fact highlighted by Powell during his speech — this could be the crux of investment philosophyCarol Schleif, Chief Market Strategist at BMO Private Wealth, expressed surprise at the market's reaction to Powell's commentsTraders hope the Fed won't be overly focused on inflation, yet Powell has repeatedly mentioned that the economy is still strong, especially relative to other regions.

Robert Pavlik, Senior Portfolio Manager at Dakota Wealth in Fairfield, Connecticut, remarked that the market's reaction to the Fed is somewhat surprising, with substantial sell-offs

However, he argues that Powell's remarks did not worsen the economic outlook and that most developments since the Fed's decision have been largely as expected.

A Chief Equity Strategist at LPL Financial in Boston mentioned that excessive positioning and emotional factors have made the stock market vulnerable to sell-offsThe significant rise in inflation expectations and related bond sell-offs provides a convenient excuse for the downturnThe Richmond Harris Financial Group's managing partner stated that the Fed has played the role of the Grinch — retracting rate cuts in 2025. Markets often harbor unrealistic expectations surrounding rate cuts; even a slight indication of policy changes can lead to substantial market correctionsIronically, considering labor market trends, the Fed may be far more likely to implement unexpected policy actions in 2025 than anyone anticipates.

Another issue worth noting is that, in the short term, the significant rise in the U.S

dollar index implies sharp declines in other currencies, primarily impacting the Japanese yenRecently, the yen has shown signs of depreciation, which could momentarily benefit yen carry trades; this aspect offers a potentially positive outlook for the market.

Indeed, concerning the stock market, two main issues require attention: first, whether a market collapse will lead to a surge in derivatives liquidation and exacerbate volatility; second, whether there will be a significant blow to expectations about real-world conditions in the medium to long term, prompting a wave of capital withdrawals.

Follow along.

In the wake of the Federal Reserve's decision to lower interest rates, most central banks in the Gulf Cooperation Council also adjusted their benchmark rates downward on Wednesday.

Oil and gas exporting countries in the Gulf usually follow the Fed's lead when it comes to interest rate adjustments, as most currencies in the region are pegged to the dollar

The only exception is the Kuwaiti dinar, which is pegged to a basket of currencies including the dollar.

The largest economy in the region, Saudi Arabia, has reduced its repo and reverse repo rates by 25 basis points to 5% and 4.5%, respectivelyThe UAE also cut its overnight deposit rate by a quarter point to 4.4%.

Most economies in the region have largely escaped the impact of persistent high inflation elsewhere and have implemented ambitious economic diversification plans to foster non-oil sector growth.

Reports indicate that the central bank of Oman also reduced its repo rate by 25 basis points to 5%. The Qatar Central Bank adjusted its three key interest rates down by 30 basis points, while the Central Bank of Bahrain lowered its overnight deposit rate by 25 basis points to 5%. The Kuwaiti Central Bank stated that "a gradual and balanced approach has been adopted in adjusting the discount rate," noting a 25-basis-point reduction to 4% since September 19.