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The Dow and S&P 500 suffered their biggest daily percentage drops since May 31 on Wednesday after the Federal Reserve cut interest rates for the first time in a decade, but remarks by Fed Chair Jerome Powell dampened expectations for further cuts going forward.

Based on the latest available data, the Dow Jones Industrial Average fell 336.26 points, or 1.24 per cent, to 26,861.76, the S&P 500 lost 33.07 points, or 1.10 per cent, to 2,980.11, and the Nasdaq Composite dropped 98.20 points, or 1.19 per cent, to 8,175.42.

In Toronto, the S&P/TSX composite index also dropped, closing down 0.36 per cent, or 59.49 points, at 16,406.56.

The materials sector lost 2.6 per cent as spot gold dropped almost 1 per cent, while energy stocks gained 1.2 per cent.

Some were expecting the Fed to leave the door open for further cuts or even a 50 basis point cut after Wednesday’s meeting, so the less dovish stance sent U.S. stocks to session lows and the dollar index to a more than two-year high.

“The Fed signaled that it is going to be data dependent but markets were priced for a more dovish outlook which the Fed did not deliver on,” said Collin Martin, director of fixed income at the Schwab Center for Financial Research in New York.

“Markets were priced for a quarter-percentage-point cut but maybe they were looking for clarity that a second cut would be coming soon, some sort of a calendar based guidance.”

MSCI’s gauge of stocks across the globe shed 0.66 per cent.

Emerging market stocks lost 0.80 per centt. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.89 per cent lower, while Nikkei futures lost 0.40 per cent.

In currencies, the sharp move higher in the dollar ate into a pound rebound, though the British currency was still up against the greenback after four days of declines.

“We are just seeing some stabilization after very bad four days,” said Lee Hardman, FX strategist at MUFG. “It doesn’t change the bigger picture and the pound will continue to weaken but clearly it won’t be a one-way street,” Hardman added.

Sterling was last trading at $1.2171, up 0.18 per cent on the day. It is on track for its weakest monthly performance against the dollar since October 2016.

The dollar index rose 0.44 per cent, with the euro down 0.58 per cent to $1.1088.

The dollar powered higher partly as the Fed “acknowledged strong labor markets, recent reasonable signs of moderate growth. It still leaves the playing field wide open as to what they’re going to do in future months,” said Tony Bedikian, head of global markets at Citizens Bank in Boston.

The Japanese yen weakened 0.12 per cent versus the greenback at 108.76 per dollar.

In commodities, crude oil futures rose for the fifth straight day, buoyed by a bigger-than-expected drop in U.S. inventories, but the stronger dollar helped bring prices down from session highs.

U.S. crude rose 0.05 per cent to $58.08 per barrel and Brent was last at $64.49, down 0.22 per cent on the day.

The yields on U.S. government debt were weighed down by the tumble in stocks.

Benchmark 10-year notes last rose 13/32 in price to yield 2.0179 per cent, from 2.061 per cent late on Tuesday.

Reuters