US stocks slump as Fed signals caution around rushing to cut interest rates

• US stocks slumped on Wednesday as the Fed said it wouldn't rush to cut interest rates.
• Central bankers kept interest rates level at their latest policy meeting.

US stocks slumped on Wednesday after the Fed issued slightly hawkish guidance on interest-rate cuts at its latest policy meeting. All three benchmark stock indexes slid lower, ending the trading session in the red.

Central bankers chose to keep interest rates level in January, maintaining its Fed funds rate target between 5.25% and 5.5%.

Inflation has cooled significantly and job gains have eased since the Fed began raising interest rates last year. Still, prices in the economy remain "elevated" and the economy is continuing to expand at a "solid" clip, the Federal Open Markets Committee said in a statement.

"The economy has made progress toward our dual mandate objectives," Fed Chair Powell said in a press conference Wednesday afternoon. "But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain."

Central bankers aren't expecting to cut rates until there's more confidence inflation will return to its 2% target, the FOMC added.

"Inflation has come down faster than anticipated but whether or not this can be sustained is central to the Fed's decision about when to begin cutting interest rates," Bankrate chief financial analyst Greg McBride said in commentary following the decision. "The Fed is certainly pushing back on the notion of a March interest rate cut, dashing investors' hopes again, but keeping options open and remaining non-committal as a central bank does."

Still, investors are pricing in a 46% chance the Fed could begin trimming interest rates in March, according to the CME FedWatch tool. Meanwhile, over 65% are betting on at least six Fed rate cuts by the end of the year.

Here's where US indexes stood at the 4 p.m. closing bell on Wednesday:

• S&P 500: 4,845.65, down 1.6%
• Dow Jones Industrial Average: 38,150.30, down 0.8% (317 points)
• Nasdaq Composite: 15,164.01, down 2.2%

Here's what else happened today:

• Here's how the election year could end up impacting the stock market and the economy.
• Microsoft's latest earnings show it's on the cusp of a years-long, trillion-dollar AI opportunity, Wedbush says.
• Here's what Wall Street is expecting from Amazon's 4th-quarter earnings report.
• It could take years for the oil and gas market to recover from the "mother of all shocks," one Harvard economist warns.
• Mounting US debt could eventually spark a "rebellion" in global markets, according to JPMorgan boss Jamie Dimon.

In commodities, bonds, and crypto:

• West Texas Intermediate crude oil dipped 2.45% to $75.91 a barrel. Brent crude, the international benchmark, traded 0.16% lower to $80.42 a barrel.
• Gold slipped 0.11% to $2,034.78 per ounce.
• The 10-year Treasury yield dropped seven basis points to 3.988%.
• Bitcoin ticked lower 1.57% at $42,864.