Disappointing expectations of further cuts from the Fed dealt a heavy blow to the markets

This report is from today's CNBC Daily Open, the international markets newsletter. CNBC Daily Open keeps investors informed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Reduce now, but less in the future
US Federal Reserve Interest rates lowered by 25 basis points on Wednesday, bringing the overnight borrowing rate to a target range of 4.25% to 4.5%. In the Fed's dot chart indicating interest rate expectations in the coming years, the central bank mostly indicated Only two price reductions for 2025This is lower than the four cuts previously expected in September.

The Bank of Japan holds interest rates
The Bank of Japan on Thursday maintained its benchmark index Interest rate unchanged at 0.25%. After that, the yen fell to its lowest level in a month against the dollar. Analysts were divided over the Bank of Japan's move: A CNBC poll It showed that 54% of participants believe that the Bank of Japan will hold, while a poll of economists conducted by Reuters expected the Bank of Japan to raise interest rates.

Sharp sell-offs in the markets
American markets It sold off sharply on Wednesday. the Dow Jones Industrial Average The stock lost more than 1,000 points, falling 2.58% for the 10th straight day of losses. the Standard & Poor's 500 Decreased 2.95% Nasdaq Composite Sunk 3.56%. On Thursday, Asia Pacific markets After the decline of Wall Street. South Korea's KOSPI fell by as much as 1.8%, one of the largest declines in the region.

Disappointing guidance from Micron
shares Micron It fell more than 15% in extended trading after the company gave Steering weaker than expectedalthough it exceeded expectations for fourth-quarter earnings. For the current quarter, Micron expects revenue to reach about $7.9 billion. This is well below the $8.98 billion that analysts had expected, according to LSEG.

(PRO) 2025 Outlook for European Equities
As the year draws to a close, major investment banks are offering their forecasts for the European market for 2025. Their views range from… Cautiously optimistic to more bullishAlthough almost everyone expressed concerns about geopolitics and trade tensions.

But investors were already confident of the Fed's cut on Wednesday. Before the Fed's December meeting concluded, the futures market indicated a 98% chance of a 25 basis point cut, according to the Fed's report. CME FedWatch tool. This means that investors have already priced in the benefits of a rate cut into stocks. In other words, yesterday's cut will not have a significant impact on stock prices.

Investors may already be pricing in more than one rate cut. A week ago, investors were betting on a 20.8% chance that the Fed would cut interest rates to 4%-4.25% in January.

Federal Reserve Chairman Jerome Powell dashed those hopes.

“With today’s action, we have lowered interest rates by a full percentage point from their peak, and our policy stance is now significantly less restrictive,” Powell said. His press conference after the meeting. “We can therefore be more cautious as we consider further adjustments to our interest rate.”

The probability of a 25-point rate cut next month has narrowed to 8.6%, according to the futures market, after the Federal Reserve released its updated chart indicating just two cuts for 2025.

It is this shift – from hopes that the Fed will go all-in on cuts to the fact that it may take its foot off the gas pedal – that is sending tremors through markets.

In other words: It's like waking up in anticipation of a gift on Christmas Day, only to find yourself deprived of gifts. This disappointment wouldn't happen at any other time of the year.

As David Russell, global head of market strategy at TradeStation, puts it, “Goodbye hole punch. No Christmas cheer from the Fed.”

— CNBC's Daria Mercado, Jeff Cox, Yun Li, Brian Evans and Lisa Kailay Hahn contributed to this report.