NEW YORK, Dec 14 (Reuters) – U.S. stocks closed lower on Wednesday in volatile trading following a Federal Reserve policy announcement that raised interest rates by 50 basis points, but its projections Economics predict higher rates for a longer period.
The central bank raised interest rates by half a percentage point on Wednesday and forecast at least another 75 basis points of higher borrowing costs by the end of 2023, as well as an increase unemployment and a near stall in economic growth.
The Fed’s latest quarterly summary of economic projections shows U.S. central bankers see the key rate – now in the 4.25% to 4.5% range – at 5.1% by the end of the year next, according to the median estimate of the 19 Fed policymakers, compared to 4.6% at the end of September.
In comments after the statement, Fed Chairman Jerome Powell said it was too early to talk about a rate cut, as the goal is to make central bank policy tight enough to lower the rate. inflation to its target of 2%.
Tuesday’s economic data, which showed a drop in consumer inflation for November, had bolstered expectations that a decision by the Fed to halt rate hikes could be on the horizon next year.
“They may be using these kinds of very aggressive forecasts to mitigate the easing that’s happened over the last two months,” Rhys Williams, chief strategist at Spouting Rock Asset Management in Bryn Mawr, Pennsylvania, said. February decision makers.
“Conditions have eased, and it’s their way of saying they won’t let any easing happen until they see unemployment rise.”
The Dow Jones Industrial Average (.DJI) fell 142.29 points, or 0.42%, to 33,966.35, the S&P 500 (.SPX) lost 24.33 points, or 0.61%, to 3,995.32 and the Nasdaq Composite (.IXIC) fell 85.93 points, or 0.76%, to 11,170.89.
[1/6] Screens on the floor of the New York Stock Exchange (NYSE) show Federal Reserve Chairman Jerome Powell at a news conference after the Federal Reserve announced interest rates would rise by half -percentage point, in New York, U.S., December 14, 2022. REUTERS/Andrew Kelly
Almost all of the 11 major S&P sectors ended the session in negative territory, with healthcare (.SPXHC) the only one to gain. Financials (.SPSY), down 1.29%, was the worst performing sector.
Despite the Fed’s statement, US Treasury yields were slightly lower after initially jumping following the announcement.
The strategy of aggressive interest rate hikes by the world’s major central banks this year has heightened concerns that the global economy could be pushed into a recession and has weighed heavily on riskier assets such as equities. This year.
Each of Wall Street’s three major averages is on track for its first annual decline since 2018 and its biggest annual percentage decline since the 2008 financial crisis.
Tesla Inc (TSLA.O) fell 2.58% after a Goldman Sachs analyst cut the price target for the electric vehicle maker’s stock.
Charter Communications Inc (CHTR.O) fell 16.38% as brokers slashed price targets following the telecom services company’s mega-spend plans for a faster internet upgrade.
Volume on U.S. exchanges was 12.15 billion shares, compared to an average of 10.55 billion shares for the full session over the past 20 trading days.
Falling issues outnumbered rising ones on the NYSE by a ratio of 1.39 to 1; on the Nasdaq, a ratio of 1.42 to 1 favored the decliners.
The S&P 500 posted eight new 52-week highs and two new lows; the Nasdaq Composite recorded 82 new highs and 223 new lows.
Reporting by Chuck Mikolajczak; edited by Jonathan Oatis
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