* Fed cuts rates by 25 basis points, next cut not a given
* Pound bounces back from 28-month low (Updates with Fed statement, market reaction)
By Rodrigo Campos
NEW YORK, July 31 (Reuters) - The dollar index rose on Wednesday and stocks tumbled even as the Federal Reserve cut interest rates after Fed Chairman Jerome Powell said the 25-basis-point cut was not the same as the beginning of a lengthy rate cutting cycle.
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.”
The Dow Jones Industrial Average fell 244.8 points, or 0.9%, to 26,953.22, the S&P 500 lost 21.03 points, or 0.70%, to 2,992.15 and the Nasdaq Composite dropped 55.37 points, or 0.67%, to 8,218.25.
MSCI's gauge of stocks across the globe shed 0.66%.
Emerging market stocks lost 0.80%t. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.89% lower, while Nikkei futures lost 0.40%.
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% on the day. It is on track for its weakest monthly performance against the dollar since October 2016.
The dollar index rose 0.44%, with the euro down 0.58% 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% 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% to $58.08 per barrel and Brent was last at $64.49, down 0.22% 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%, from 2.061% late on Tuesday.
Spot gold dropped 0.9% to $1,418.00 an ounce. Copper lost 0.13% to $5,940.00 a tonne.
Reporting by Rodrigo Campos; Additional reporting by Karin Strohecker & Olga Cotaga in London and Kate Duguid & Richard Leong in New York Editing by Nick Zieminski and Susan Thomas