Stocks tumbled Wednesday after the Federal Reserve made its first interest cut in more than a decade and Fed Chairman Jerome Powell hinted that future cuts are not guaranteed.
"We're thinking of it essentially as a mid-cycle adjustment to policy," Powell said during a press conference. "I'm contrasting it with the beginning of a lengthy cutting cycle."
The Dow Jones Industrial Average, which saw its biggest one-day decline since May 31, dropped 333 points (1.23%) to 26,864, while the S&P 500 slipped 1.09% and the Nasdaq Composite was off 1.19%.
As was widely expected, the Federal Open Market Committee dropped the target range for its overnight lending rate to 2% to 2.25%, or 25 basis points from the previous level.
"This action supports the committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective are the most likely outcomes, but uncertainties about this outlook remain," the Fed said in announcing the rate cut.
"The threat of a recession has historically been the main catalyst for monetary easing, but today we're seeing a Fed hanging its hat solely on inflation and the global economy," said Mike Loewengart, vice president of investment strategy at E*Trade. "So those two factors will be closely watched by all for the balance of the summer."
Should inflation stay where it is, Loewengart said, "investors should consider low rates the new normal for the considerable future."
"The Fed is now headed down a slippery slope of cutting rates while the economy is still healthy -- and economic data appears to be strengthening, not weakening," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
Among individual stocks:
Apple (AAPL - Get Report) , the Dow's top gainer, rose 2% to $212.96 after the iPhone maker posted fiscal-third-quarter earnings and revenue that topped analysts' forecasts and showed strength across almost all of its business segments. Advanced Micro Devices (AMD - Get Report) fell 10% to $30.45 after the chipmaker forecast softer near-term revenue following a second-quarter earnings report that was largely in line with estimates. AMD is the Stock of the Day at Real Money, our premium site for active traders. Shares of General Electric (GE - Get Report) rose nearly 1% to $10.44 after the industrial powerhouse posted stronger-than-expected second-quarter earnings. Humana (HUM - Get Report) climbed 4.4% to $297.06 after the health-care company posted better-than-expected second-quarter earnings and lifted its full-year profit outlook.In economic news, payroll firm ADP reported that private employers added 156,000 jobs during July, exceeding economists' average forecast for 150,000 job gains. The month also marked an increase from the 102,000 jobs added in June.
However, the Chicago PMI business barometer decreased to 44.4 in July from 49.7 in June to hit its lowest level since December 2015. The indicator's second-quarter weakness continued into the year's third period. On the trade front, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Wednesday left their first face-to-face meeting with Chinese officials in Shanghai after less than half a day of negotiations. China's Commerce Ministry said in a statement that both sides "had a candid, highly effective, constructive and deep exchange on major trade and economic issues of mutual interest."Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.
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