On the evening of December 19, the financial markets witnessed a significant turbulence that took many by surpriseContrary to expectations that the Federal Reserve's decision to lower interest rates would provide a much-needed boost to American stocks, the outcome was quite the opposite, resulting in a sharp decline across the board.

As the market closed, the Dow Jones Industrial Average noted its tenth consecutive day of lossesThis marked the longest streak of declines since October 1974. The Dow dropped by an alarming 1123.03 points, reflecting a 2.58% dropSimilarly, the S&P 500 index fell by 2.95%, while the Nasdaq Composite Index plunged by 3.56%, with the latter experiencing further losses by the end of the trading day.

In addition to the disillusionment within the U.Smarkets, European and Asia-Pacific futures pointed toward further declines

Commodities like gold and oil also took a hit, following the bearish trendCryptocurrencies were not spared either, with Bitcoin falling by over 5%, edging closer to the critical $10,000 mark; Ethereum plummeted more than 6%, while Dogecoin suffered a decline exceeding 9%. In the past 24 hours, 253,601 traders faced liquidation events, with the total loss amounting to a staggering $702 million.

Around 3 AM Beijing time on December 19, the Federal Reserve announced its decision to cut the benchmark interest rate by 25 basis points, adjusting the federal funds rate target range from 4.5%–4.75% to a new range of 4.25%–4.50%. This reduction was the third in a row following the Fed's initiation of a new easing cycle — the first in four years — impacting a total of 100 basis points so farIn the backdrop of these changes, Chairman Powell's hawkish rhetoric played a crucial role in triggering the market's sharp decline

• Can the U.S. Stock Market Continue to Rise?
• Uncertainty in Japan's Central Bank Interest Rate Trends
• How to Weigh Economic Prospects?
• This year, agencies have started leveraging PR for profit.
• Quantum Computing Breakthrough Ignites the Market!

This leads to a vital question: just how significant are these effects?

In what can be characterized as a historic evening, the U.Smarkets faced unprecedented turmoilFor the first time in months, all three major indices – the Dow, S&P 500, and Nasdaq – experienced severe lossesThe Dow's decline of 1123.03 points constitutes its largest drop since August, and it is only the second time this year that the index has fallen by over 1000 points in a single trading sessionMeanwhile, the S&P 500 lost 2.95%, while the Nasdaq showed a steeper fall of 3.56%. With the Dow experiencing ten straight days of reductions, this marked the longest losing streak since October 1974.

The bear market was evident across various sectors, with all eleven major sectors within the S&P 500 index also decliningNotably, real estate and consumer discretionary sectors were among the hardest hit.

Simultaneously, the U.S

dollar index surged by 1.22%, surpassing the 108 mark, while 10-year Treasury yields climbed close to 12 basis points, reaching 4.504%. In the afternoon trades, it hovered around the critical 4.5% levelThe two-year Treasury yield also saw an increase of more than 10 basis points, rising to 4.348%.

In Canada, the primary stock index recorded its largest drop in ten monthsThe S&P/TSX Composite Index finished down by 562.71 points or 2.2%, reaching its lowest close since November 5. Similarly, the yield on Canada’s ten-year bonds rose by 8.2 basis points to 3.224%, reflecting the movements in U.StreasuriesEvery one of the top ten sectors closed lower, with technology stocks hitting a notable dip of 4.5%, and electronic commerce giant Shopify Incdropping by 7.3%. The declines were echoed across major European and Asia-Pacific indices.

Despite the widespread downfall of the markets, a divergence of opinions remained evident

Wall Street showed a notably pessimistic outlookAccording to the FedWatch tool based on futures trading, the likelihood of the Federal Reserve lowering rates again in its upcoming January meeting reduced to below 10%.

Conversely, some institutional investors noted a positive aspect: the resilience of the U.Seconomy itselfPowell had mentioned the economy's robust nature during his statements, which remains the bedrock of investment considerationsCarol Schleif, Chief Market Strategist at BMO Private Wealth, expressed surprise at the market's strong reaction to Powell’s commentsTraders hoped for a less inflation-focused stance from the Fed, yet Powell emphasized that the economy was still strong, especially when compared to other global regions.

The market's reaction was indeed surprising with such heavy selling, but Powell's comments didn’t seem to worsen the economic situation

Moreover, since the Fed initiated policy actions, most developments were anticipated.

Overleveraged positions and market sentiment create an environment ripe for sell-offsAn increase in inflation expectations and correlated bond sell-offs served as triggers for this behaviorAn executive partner at Richmond Harris Financial Group remarked that the Fed played a "Grinch-like" role, pulling back on rate cuts initially anticipated in 2025. Markets are prone to develop overly optimistic expectations towards rate cuts, and minor signs of policy changes often lead to substantial market correctionsIronically, considering labor market trends, the Fed’s potential for undertaking actions beyond expectations in 2025 could be significantly higher.

Another focal point to watch is that in the short term, a significant surge in the dollar index often leads to declines in non-dollar currencies, prominently affecting the yen

Recently, the yen has shown a tendency to depreciate, potentially revitalizing short interest transactions, shedding a more positive light on the situation for the market.

Ultimately, there are two critical concerns for the stock market: first, whether the recent market crash will trigger a wave of derivative liquidations that exacerbate stock market volatility in the short term; and second, whether it poses a serious threat to the optimistic expectations for the real economy, leading to a retreat of investor capital.

In many regional economies, the influence of persistent high inflation from other parts of the world has been relatively minimalInstead, they have been implementing ambitious economic diversification strategies to encourage growth in non-oil sectors.

This week, Oman’s central bank has reduced its repurchase rate by 25 basis points to 5%. Qatar’s central bank slightly lowered its three main rates by 30 basis points, while Bahrain’s central bank cut the overnight deposit rate by the same margin to 5%. The Central Bank of Kuwait stated that it has taken a gradual and balanced approach in adjusting the discount rate, having already lowered it by 25 basis points to 4% since September 19.

The unexpected decline of the U.S