NEW YORK - Wall Street stocks finished sharply lower on Wednesday after the Federal Reserve announced another big interest rate hike and signalled more increases ahead.
Major US indices lost more than 1.5 per cent following a press conference with Fed chairman Jerome Powell that observers characterised as more hawkish than expected.
Stocks had initially rallied after the Fed’s 1800 GMT statement (2am on Thursday, Singapore time), but gave back those gains during the press conference and fell further in the final hour of trading.
The Fed statement “had something for everyone,” said a Wells Fargo note. “But the press conference favoured the hawks.”
The Dow Jones Industrial Average fell 1.6 per cent to 32,147.76.
The broad-based S&P 500 dropped 2.5 per cent to 3,759.69, while the tech-rich Nasdaq Composite Index shed 3.4 per cent to 10,524.79.
The US central bank, as expected, raised the benchmark borrowing rate by 0.75 percentage point. But markets cheered a tweak in the Fed’s language to the effect that the US central bank would assess the “cumulative” effect of its monetary policy moves.
Investors viewed the statement as corroborating its hope that the Fed could undertake smaller hikes in December and at future meetings.
But major indices tumbled into the red during the press conference when Powell said it was “very premature” to discuss pausing rate increases and that he didn’t think the body had “overtightened.”
FHN Financial’s Chris Low noted that Powell indicated that in order to tame inflation, interest rates would need to settle at a higher level than previously thought.
“The biggest takeaway was not the expected strong hint at a slower pace,” Low said. “It was the realization rates would have to go higher.”
Among individual companies, Boeing gained 2.8 per cent as executives outlined a plan to return to financial strenth in the 2025-26 timeframe after a lengthy slump due to the 737 MAX and Covid-19 crises.
Airbnb sank 13.4 per cent as disappointment in the home-rental company’s fourth-quarter outlook spurred a selloff after earnings topped estimates.
