Dow Jones Industrial Average retreats after Fed's Powell reconsiders third rate cut

• The Dow dipped on Wednesday following the Fed's latest rate cut.
• Fed Chair Powell threw cold water on expectations for a third straight rate trim.
• Citing a lack of official data, Powell leaned into the cautious side.

The Dow Jones Industrial Average (DJIA) shuddered on Wednesday, knocking lower after Federal Reserve (Fed) Chair Jerome Powell warned that the latest Fed interest rate cut may be the last rate move for a little while.

The Fed delivered a follow-up 25 basis point interest rate cut on Wednesday, as markets had broadly expected. The Fed also signaled a further reduction in Quantitative Easing (QE) balance sheet items, which was also expected by markets. The true plot twist came when Fed Chair Jerome Powell, citing a lack of official employment and labor data amid the ongoing US government shutdown, suggested that the Fed may be forced into another open-ended wait-and-see cycle as policymakers struggle to accurately forecast economic outcomes.

Fed Chair Powell dances between inflation and employment concerns

Fed Chair Powell went on to note that there is still some room to move to the upside on inflation thanks to tariff price pressures, though pulled up just short on flashing any meaningful warnings on the labor market, noting that the Federal Open Market Committee (FOMC) doesn't "see weakness in the job market accelerating."

Rate market expectations for another interest rate cut in December tumbled from above 90% pre-Fed rate announcement all the way down to 50% post-FOMC press conference, with rate traders now pricing in 91% odds that a third rate trim will come in January, with a cautionary 70% betting ratio on March.

Dow Jones 5-minute chart