Wall Street dips, dollar strengthens as Fed cuts rates, tempers outlook

Wall Street turned lower and the dollar gained strength on Wednesday after the U.S. Federal Reserve delivered the expected rate cut, but sent a clear signal that it will ease the pace of further cuts in the coming year.

Benchmark Treasury yields moved higher on the news, and the Dow reversed its gains, setting itself up for its tenth consecutive daily loss, its longest losing streak since 1974. As expected, the Federal Open Market Committee (FOMC) cut the Fed funds target rate by 25 basis points at the conclusion of its final policy meeting of 2024. But the central bank also reduced the number of projected rate cuts in the coming year. The policymakers now expect two interest rate cuts by the end of 2025, down from four in September, and set up the likelihood of a pause in January.

“The Fed didn’t throw any curveballs, right? They cut as expected, and they’re using language hinting at fewer cuts next year and into 2026,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “The market was holding out hope that maybe there’d be a little more dovishness to the statement, but that wasn’t the case.”