Stocks fall after Fed interest rate announcement
Stocks fell after the Federal Reserve announced plans to start raising interest rates in March, wind down its pandemic stimulus efforts and tackle rising inflation.
The Fed’s Wednesday afternoon statement and the ensuing press conference kicked off a wild ending to a trading day that reversed large initial gains. The S&P 500 closed down 6.52 points, or 0.1%, at 4349.93, with the broad index now falling on six of the past seven trading days. The tech-focused Nasdaq composite index rose 2.82 points, or less than 0.1%, to 13,542.12, while the Dow Jones Industrial Average fell 129.64 points, or 0.4% , at 34168.09.
Stocks rose to start the day but pared their gains after Fed Chairman Jerome Powell said the central bank’s rate-setting committee was ready to raise rates at its meeting on Tuesday. half-March. The Fed also said it had approved a final round of asset purchases, which will wrap up its stimulus package by March, and discussed plans to trim its $9 trillion securities portfolio, which has more than doubled since March 2020.
To temper high inflation, Federal Reserve Chairman Jerome Powell said the central bank intended to raise short-term interest rates in mid-March. Photo: Federal Reserve
Wednesday’s trading leaves the three major indices down more than 5% in 2022 so far, with the Nasdaq down 13%.
“It’s definitely been a crazy start to the year,” said Josh Chastan t, senior investment analyst at GuideStone Capital Management. “It’s normal when you go from a stimulative Fed to a less accommodating Fed.”
Concerns about the pace of the Fed’s interest rate hikes and their likely impact on some stocks popular with individual investors were evident on Wednesday. Ahead of the announcement, shares of AMC Entertainment and GameStop rose 13% and 17%, respectively, partly reflecting expectations that the market had shaken off the worst of its January jitters. Shares of these companies fell after the Fed announcement: AMC ended down $0.08, or 0.5%, at $15.94, while GameStop closed at $3.47, or 3.5%, to $103.26. Exchange-traded fund ARK Innovation fell $1.77, or 2.5%, to $69.03.
“We might have had a little more exuberance in the morning than we should have,” said Jeff Klearman, portfolio manager at GraniteShares.
The S&P 500 technology sector rose 4% at the start of the trading day, ending up 0.7%. Microsoft shares rose $8.22, or 2.9%, to $296.71 after the software giant said earnings continued to grow as its cloud services business remained strong. Semiconductors also advanced: Nvidia rose $4.48, or 2%, to $227.72, Micron Technology added $1.25, or 1.6%, to $81.97 and AMD added gained $0.42, or 0.4%, to $110.71.
Mark Luschini, chief investment strategist at Janney Montgomery Scott, said Wednesday morning that investors should consider stocks in economically sensitive sectors, rather than technology stocks, which may be less attractive in times of rising interest rates.
“It’s premature to say, ‘OK, that was it, and now we’re back in the bull market moving forward,'” Mr Luschini said of the declines earlier in January.
In bond markets, the yield on the benchmark 10-year Treasury note ended Wednesday at 1.845%, while the 2-year Treasury note stood at 1.089%, the highest level since February 2020. The yields move inversely to prices.
The Fed statement noted the continued spread of the Omicron variant of Covid-19, saying “the trajectory of the economy continues to depend on the evolution of the virus.” US data showed average daily deaths from the disease exceeding the peak of the Delta variant.
Investors are also watching rising tensions between Russia and Ukraine that have caught the attention of NATO allies. Geopolitical turbulence has supported oil in recent days, pushing it to its highest level since 2014.
The VIX, a measure of expected volatility that is sometimes dubbed Wall Street’s fear gauge, climbed this week as stock markets fell.
In other stocks, Mattel gained $0.85, or 4.3%, to $20.46 after the Wall Street Journal reported it had been awarded the license to produce toys based on Walt Disney.it is
princess range and the “Frozen” franchise. Texas Instruments gained $4.37, or 2.5%, to $178.33 after the company posted an increase in revenue. AT&T shares fell $2.23, or 8.4%, to $24.25 after the company turned a profit by improving its wireless revenue and shedding the burden of its pay-TV business which was losing customers in 2021.
Brent, the international oil benchmark, added 1.8% to $88.75 a barrel. Supply issues have helped push up prices.
Bitcoin’s dollar value fell 0.4% from its level at 5 p.m. ET on Tuesday to $36,740. The world’s largest cryptocurrency by market value has recently faltered alongside broader markets, losing almost half of its value from its November peak.
Tech stocks led the stock gain on Wednesday.
Photo:
Ted Shaffrey/Associated Press
Overseas, the pan-continental Stoxx Europe 600 index rose 1.7%, with the biggest gains in the travel and leisure sector. Stock indices in Asia closed mixed. China’s Shanghai Composite and Hong Kong’s Hang Seng gained 0.7% and 0.2% respectively. Japan’s Nikkei 225 and South Korea’s Kospi each fell 0.4%.
Write to Hardika Singh at hardika.singh@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com
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