S&P 500 Drops 3% on Dec 18, 2025: Fed Rate Cut Sparks Market Caution
On December 18, 2025, the S&P 500 experienced a sharp 3% decline following the Federal Reserve’s decision to cut interest rates, accompanied by a cautious outlook on future monetary policy.
Michael Bromberg, a seasoned finance editor with over ten years of experience, specializes in breaking down complex financial concepts into clear, accessible language. He holds a Bachelor of Arts in Literature from the University of Wisconsin-Madison and a Master’s degree in Linguistics from Universidad de Antioquia, Medellin, Colombia.
Key Highlights
- The S&P 500 fell 3% on December 18, 2024, after the Federal Reserve reduced interest rates but emphasized caution regarding upcoming policy decisions.
- Shares of cloud-based HR services provider Paycom plunged despite recent price target increases by analysts.
- Jabil shares surged following better-than-expected quarterly earnings and an upward revision of full-year guidance.
Major U.S. stock indices declined sharply as the Federal Reserve wrapped up its last policy meeting of 2024. The central bank lowered benchmark interest rates by 0.25%, in line with expectations, yet signaled that persistent inflation concerns might necessitate a more conservative approach in 2025.
Although the S&P 500 traded higher for most of the day, it reversed course after the rate cut announcement and remarks from Fed Chair Jerome Powell, closing down 3%. The Dow Jones Industrial Average dropped 2.6%, marking its longest streak of consecutive losses in over 40 years. The tech-heavy Nasdaq Composite fell 3.6%, pressured by worries over future interest rate trends.
Paycom Software (PAYC), a provider of human resources solutions, saw its shares tumble 10.1%, the largest decline among S&P 500 components. Concerns persist about product cannibalization as its Beti automated payroll system reportedly reduces demand for other offerings. Despite recent price target upgrades by Mizuho and Stifel, both remain below Paycom’s current stock price.
Tesla (TSLA) shares declined 8.3%, retreating from recent record highs despite positive analyst outlooks highlighting growth potential in autonomous driving and AI under the incoming administration. The drop followed news of federal investigations into CEO Elon Musk and SpaceX over national security issues.
Real estate investment trust BXP, focused on premium office properties, fell 7.6%. While East Coast and central business district markets show improvement, weaker performance in West Coast and suburban areas signals an uneven office real estate recovery, challenging diversified REIT portfolios.
Broadcom (AVGO), after surpassing a $1 trillion market cap milestone, dropped 6.9% for the second consecutive day. Despite strong AI-driven earnings and optimistic guidance prompting price target increases, the recent rally pushed shares beyond analyst average forecasts, indicating potential full valuation.
Leading S&P 500 gains, circuit board manufacturer Jabil (JBL) surged 7.3% after exceeding sales and profit expectations for fiscal Q1 2025 and raising full-year outlook. The company benefits from strong demand in cloud, data center infrastructure, and digital commerce sectors, following restructuring efforts earlier in the year.
Several healthcare stocks rebounded, recovering from recent losses amid growing political scrutiny of the pharmacy benefit management sector. Despite bipartisan criticism and possible business model changes, analysts maintain a positive growth outlook. Cigna (CI) rose 6.3%, with UnitedHealth (UNH), Centene (CNC), and CVS Health (CVS) also gaining ground.
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