US Market Crashed On March 18 Ahead Of Fed Policy Outcomes; Nasdaq Drops 2%, Dow Jones, S&P Down 1%

The US stock market crashed on March 18, with tech-heavy index Nasdaq taking the worst hit. Nasdaq plunged by nearly 2%, while S&P 500 and Dow Jones slipped by 1% each. With that, Wall Street has halted its two-consecutive sessions gaining spree. The performance comes ahead of FOMC policy outcomes on Wednesday, March 19. The 2-days US Federal Reserve meeting commenced on Tuesday.

Dow Jones Industrial Average: The DJIA plunged by 390.41 points or 0.93%, trading near its intraday low of 41,448.97.

S&P 500: The Standard and Poor's 500 index shed 75.03 points or 1.3% to trade at 5,601.03. The index was also near its intraday low of 5,597.76.

Nasdaq Composite Index: The tech-heavy index tumbled by 325.68 points or 1.83% to perform at 17,484.02. The index was also near its day's low of 17,431.67.

As per Trading Economics, US stocks were lower on Tuesday, with the S&P 500 falling 1.3%, the Dow Jones declining about 340 points and the Nasdaq losing 1.7%, after booking gains in the past two sessions. Investors remain cautious about the economic growth outlook and the potential impact of Trump's policies on the US economy.

Meanwhile, Trading Economics data added that traders eagerly awaiting updated economic projections and the Fed's policy outlook, set to be released tomorrow. Markets currently anticipate two rate cuts this year, with the probability of a third cut increasing. On the data front, housing starts, building permits and industrial production exceeded expectations, while both import and export prices increased instead of declining as forecasted. On the corporate front, Alphabet shares fell 2.6%, with news showing Google will acquire cloud security Wiz for $32 billion. Nvidia lost 2.2%, with its CEO set to give a keynote address at the company's GAI conference.

Meta and Tesla shares nosedived by 4-5%, while Amazon and Microsoft also plummeted by 2% each.

Majority of market experts are predicting Fed to hold key fund rates for the second policy in a row on March 19. In January 2025 policy, the Jerome Powell's committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent.

However, FOMC said on Janaury 29, that recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. It added, "Inflation remains somewhat elevated."

FOMC aims to achieve maximum employment and inflation at the rate of 2 percent over the longer run. During this policy, Powell had hinted at fewer rate cuts in 2025.

Chris Beauchamp, Chief Market Analyst at IG Bank in his note said, stock markets are likely to react to any shifts in the Fed's tone rather than the expected rate hold itself. Spread betting traders should watch for volatility following the announcement, especially if the Fed's outlook differs from market expectations.

He added, "​Bond markets will be particularly sensitive to any hints about future rate cuts. The yield curve has been closely monitored as an economic indicator, with investors using it to gauge recession risks and potential policy changes."

Furthermore, Beauchamp said, "​The currency markets, particularly the US dollar, will likely respond to any adjustment in the Fed's forward guidance. A dovish tone could weaken the dollar, while a more hawkish stance might strengthen it against major currencies."

Analysts believe that FOMC will keep rates because of the uncertainties that emerged due to Donald Trump's tariff plans on foreign countries. Trump has already imposed 25% tariffs on imports from Mexico and Canada with some exemptions, while he doubled tariffs to 20% from 10% on China. He has threatened to levy as much as a 200% tariff on alcohol from the European Union, while he has announced a 25% reciprocal tariff on all steel and aluminium imports, autos, chips and pharma companies which is expected from April 2. He promised to impose more tariffs if needed!