Stocks fall after the Fed cuts rates, signaling a slower lowering pace in 2025

U.S. equities fell on Wednesday, with all three major indexes registering their steepest daily fall in months, as the Federal Reserve cut interest rates by a quarter of a percentage point but disappointed some investors with projections of a more cautious easing path for next year.

The Fed dropped rates by 25 basis points to 4.25%-4.50%, and its summary of economic predictions (SEP) indicated that it will cut rates by a half percentage point by the end of 2025, citing a strong job market and a recent slowdown in inflation reduction.

"Looking at the adjustments to the statement of economic projections, they really had no choice," said Ellen Hazen, chief market strategist at F.L.Putnam Investment Management in Wellesley, Massachusetts.

"So, based on all of the revisions they made, it's evident that the economy is running much hotter than their previous projections. And that must contribute to their willingness to perhaps pause."

The Dow Jones Industrial Average (.DJI) slid 1,123.03 points, or 2.58%, to 42,326.87; the S&P 500 (.SPX) sank 178.45 points, or 2.95%, to 5,872.16; and the Nasdaq Composite (.IXIC) fell 716.37 points, or 3.56%, to 19,392.69.

The Dow fell for the tenth straight session, the longest sequence of daily losses since an 11-session skid in October 1974.

The Dow and S&P experienced their largest one-day percentage declines since August 5, while the Nasdaq experienced its largest daily fall since July 24.