NEW YORK – U.S. stocks suffered one of their worst days of the year after the Federal Reserve suggested Wednesday that it may provide less adrenaline to the U.S. economy in 2025 than previously thought.

The S&P 500 fell 2.9%, just shy of its biggest loss of the year, moving further away from its all-time high hit a few weeks ago. The Dow Jones Industrial Average lost 1,123 points, or 2.6%, and the Nasdaq Composite lost 3.6%.

The Fed said Wednesday that it is cutting its key interest rate for the third time this year, continuing the dramatic turnaround that began in September when it began cutting interest rates from a two-decade high to help boost the labor market to support. Wall Street loves lower interest rates, but this cut was already widely expected.

The bigger question is how much more the Fed will cut next year. A lot depends on it, especially after expectations of a series of cuts in 2025 helped the U.S. stock market hit an all-time high 57 times so far in 2024.

Fed officials released forecasts Wednesday showing they expect an average of two more rate cuts in 2025, equivalent to half a percentage point. That’s fewer than the four cuts expected just three months ago.

“We are in a new phase of the process,” said Fed Chairman Jerome Powell. The central bank has already quickly cut its key interest rate by a full percentage point since September to a range of 4.25% to 4.50%.

Asked why Fed officials are trying to slow their cuts, Powell pointed out that the job market appears to be doing well overall and that recent inflation readings have increased. He also noted uncertainties that would require policymakers to respond to impending, yet-to-be-determined changes in the economy.

While lower interest rates can stimulate the economy by making borrowing cheaper and driving up investment prices, they can also stimulate inflation.

Powell said some Fed officials, but not all, were already trying to take into account the uncertainties associated with a new administration entering the White House. Concern is growing on Wall Street that President-elect Donald Trump’s preference for tariffs and other measures could further boost inflation and economic growth.

“If the path is uncertain, go a little slower,” Powell said. It is “not unlike driving on a foggy night or entering a dark room full of furniture. You just slow down.”

One official, Cleveland Fed President Beth Hammack, said the central bank shouldn’t have even cut interest rates this time. She was the only one to vote against Wednesday’s rate cut.

Lower expectations of interest rate cuts in 2025 pushed up Treasury yields in the bond market and weighed on the stock market.

The yield on the 10-year Treasury note rose to 4.51% from 4.40% late Tuesday, a notable development for the bond market. The two-year Treasury yield, more in line with expectations for Fed action, rose to 4.35% from 4.25%.

On Wall Street, shares of companies feeling the most pressure from higher interest rates posted some of the worst losses.

Stocks in smaller companies, for example, performed particularly poorly. Many need to borrow to fuel their growth, which means having to pay higher interest rates on loans can be more painful for them. The Russell 2000 index of small-cap stocks fell 4.4%.

On Wall Street, shares of General Mills fell 3.1% despite reporting higher-than-expected profit for its latest quarter. The maker of Progresso soups and Cheerios said it would increase its investments in brands to help them grow, leading it to cut its profit forecast for this fiscal year.

Nvidia, the superstar stock responsible for part of Wall Street’s record rise in recent years, fell 1.1%, extending its weeks of panic. It has fallen more than 13% since its record last month and has fallen in nine of the last 10 days as its major momentum fades.

On Wall Street’s winning side, Jabil rose 7.3%, adding to market leadership, after the company reported higher earnings and revenue for the latest quarter than analysts expected. The electronics group also increased its sales forecast for the full financial year.

Overall, the S&P 500 fell 178.45 points to 5,872.16. The Dow Jones Industrial Average fell 1,123.03 to 42,326.87 and the Nasdaq Composite slipped 716.37 to 19,392.69.

In overseas stock markets, London’s FTSE 100 rose less than 0.1% after data showed inflation accelerated to 2.6% in November, its highest in eight months. The Bank of England is also meeting this week to discuss interest rates and will announce its decision on Thursday.

In Japan, where the Bank of Japan concludes its own monetary policy meeting on Friday, the Nikkei 225 slipped 0.7%. That’s despite a 23.7% rise for Nissan Motor Corp., which said it was in talks to work more closely with Honda Motor Co., although no decision had been made on a possible merger. Honda Motor shares fell 3%.

Nissan, Honda and Nissan alliance member Mitsubishi Motors Corp. agreed in August to share electric vehicle components such as batteries and jointly research autonomous driving software to better adapt to dramatic changes in the automotive industry.

AP writer Zimo Zhong contributed.