US equities lost approximately $490 billion in market value within 25 minutes after the Federal Reserve raised its policy rate by 25 basis points to a range of 3.75%–4.00%. The move marked the first US rate increase since 2023.
The rate hike itself was widely expected, limiting the surprise from the decision. The sharp decline in equity values instead points to the market reaction to the broader implications of renewed monetary tightening and the Federal Reserve’s policy outlook.
Higher interest rates can place pressure on equity valuations by increasing the discount rate applied to future corporate earnings and making fixed-income assets relatively more attractive. Growth and technology stocks can be particularly sensitive to changes in interest-rate expectations because a larger portion of their valuations may depend on future earnings.
