Fed's Rate Cut Impact: Stocks Dip Amid Economic Projections

U.S. stocks declined following a Federal Reserve rate cut of 0.25% and projections suggesting fewer cuts next year. The Dow, S&P 500, and Nasdaq all dropped as Treasury yields rose. The Fed plans further rate cuts through 2025, reacting to labor market strength and inflation persistence.

The U.S. stock market tumbled on Wednesday after the Federal Reserve announced a 0.25% interest rate cut while projecting a slower pace of reductions for the upcoming year. This decision erased earlier gains and left investors questioning future economic strategies from the Fed.

The updated economic projections indicate the Fed plans additional rate cuts totaling a half percentage point by the end of 2025, considering the solid labor market and recent challenges in reducing inflation. Investors closely monitored Fed Chair Jerome Powell's comments for clarity on interest rate trajectories.

The Dow fell by 105.67 points, or 0.25%, to 43,342.93. The S&P 500 dropped by 28.31 points, or 0.46%, to 6,022.71, and the Nasdaq Composite decreased by 109.43 points, or 0.55%, to 19,999.63. Despite higher U.S. Treasury yields following the announcement, rising interest rates are viewed as a deterrent to the equity market, favoring less risky investments while restraining corporate earnings growth potential.

(With inputs from agencies.)