Expectations of more Fed cuts dampened markets

This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open gives investors access to everything they need to know, wherever they are. Like what you see? You can subscribe here.

Cut now, but less ahead
US Federal Reserve lower interest rates by 25 basis points on Wednesday, taking its overnight lending rate to a target range of 4.25%-4.5%. In the Fed's dot plot showing expectations for rates in the coming years, the central bank mostly pointed only two rate cuts for 2025less than the four cuts previously expected in September.

The Bank of Japan has rates
The Bank of Japan maintained its benchmark on Thursday changed so far +0.25% compared to yesterday.. After that, the yen weakened to a one-month low against the dollar. Analysts were divided over the BOJ's move: A CNBC survey showed that 54% of respondents thought the BOJ would hold, while a poll of economists by Reuters expected the BOJ to raise rates.

Sharp sales in markets
US markets sell big on wednesday. The Dow Jones industrial average lost more than 1,000 points, falling 2.58% for the 10th straight day of losses. The S&P 500 back to 2.95% and the Nasdaq Composite has sunk by 3.56%. On Thursday, the Asia-Pacific markets the collapse of Wall Street continued. South Korea's Kospi index fell as much as 1.8%, one of the region's steepest falls.

Disappointing management from Micron
Sections of Micron fell more than 15% in extended trading after the company gave up weaker than expected guidanceeven though it beat earnings expectations for its most recent quarter. For this quarter, Micron expects revenue to be around $7.9 billion. That's far less than the $8.98 billion expected by analysts, according to LSEG.

(PRO) 2025 prospects for European equities
As the year draws to a close, leading investment banks are releasing their outlook on the European market for 2025. cautiously optimistic to the most bullishalthough nearly all expressed concerns about geopolitics and trade tensions.

But investors were already confident about Wednesday's Fed cut. Before the December Fed meeting ended, the futures market indicated a 98% chance of a 25 basis point cut, according to the FedWatch CME tool. That means investors had already priced in the benefits of a rate cut in stocks. In other words, yesterday's cut would have little effect on stock prices.

Investors may have already priced in more than one rate cut. A week ago, investors were betting on a 20.8% chance of the Fed lowering rates to 4%-4.25% in January.

Fed Chairman Jerome Powell dashed those hopes.

“With today's action, we have lowered our policy rate by a percentage point from the peak, and our policy stance is now significantly more restrictive,” Powell said at his press conference after the meeting. “We can therefore be more cautious when considering further changes to our policy level.”

The possibility of a 25 basis point cut next month fell to 8.6%, according to the futures market, after the Fed released its updated dot plot showing just two cuts for 2025.

It is this shift – from hopes that the Fed will go full throttle with cuts to the fact that it may even take its foot off the accelerator – that is sending tremors through the markets.

To put it another way: It's like waking up expecting a present on Christmas day, only to have no presents. That disappointment would not happen at any other time of the year.

As David Russell, head of global market strategy at TradeStation, famously said, “Goodbye to the punch bowl. The joy of Christmas is not from the Deer.”

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