The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 8 percent and 9 percent, respectively, this month. The S&P 500 is now in the red for 2018 by 6.3 percent.
The Dow has lost over 1,250 points this week.
The Fed decided to hike its benchmark overnight lending rate by one quarter point on Wednesday to a target range between 2.25 to 2.5 percent. The Fed did however trim its 2019 outlook for rate hikes to just two increases from three previously.
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“I think the market reaction to all of this is the Fed is going to overdo it,” said James Paulsen, chief market strategist at Leuthold Group. “Powell said he sees no problem with balance sheet run off. That’s the one that hurts, that’s another potential path of dovishness that he didn’t take.”
The central bank permits $50 billion a month to run off the balance sheet, a collection of bonds the central bank bought to stimulate the economy during and after the financial crisis.
“I think that the run-off of the balance sheet has been smooth and has served its purpose,” he said during a news conference. “I don’t see us changing that.”
Equities across a range of sectors plunged following the Fed’s announcement. Consumer companies including Target, Amazon, Newell Brands and Nordstrom all fell more than 3 percent. Banks including Citigroup and Wells Fargo each lost more than 1.5 percent.
Aircraft manufacturer Boeing, which had led the Dow higher earlier in the session, dropped 2.5 percent. Industrial conglomerate 3M shed 2.3 percent while United States Steel Corp lost 6 percent.
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