The ProShares Ultra VIX Short-Term Futures ETF (UVXY) plummeted by 7.84% in pre-market trading on Thursday, December 19, 2024. The steep decline came as the Federal Reserve's hawkish stance triggered a surge in market volatility and a broad sell-off across U.S. equity markets.

UVXY is an exchange-traded product designed to track the performance of short-term VIX futures contracts, making it highly sensitive to changes in market volatility. The VIX, often referred to as Wall Street's "fear gauge," measures the expected volatility priced into S&P 500 index options over the next 30 days.

On Wednesday, the Fed raised interest rates by 0.25% as widely expected, but also signaled the potential for just two rate cuts in 2025, fewer than the three previously anticipated by markets. Fed Chair Jerome Powell described this as a "new phase" for monetary policy, emphasizing that rates are now closer to a neutral stance after cumulative increases.

The Fed's hawkish messaging sparked a frenzied sell-off across Wall Street, with the Dow Jones Industrial Average plunging 2.6%, the S&P 500 dropping 2.9%, and the Nasdaq 100 plummeting 3.6%. The CBOE Volatility Index (VIX) soared by a staggering 58% to 25, reflecting heightened investor anxiety and uncertainty over the future path of interest rates. As a volatility-linked product, UVXY's value was directly impacted by the sudden spike in market turbulence.