Stocks fell Wednesday after the Federal Reserve raised rates by 25 basis points, as was widely expected.
The Dow Jones Industrial Average closed lower by 270.29 points, or 0.80%, to end at 33,414.24. The S&P 500 dropped 0.70% to close at 4,090.75. The Nasdaq Composite slid 0.46% to close at 12,025.33. The indexes notched three-day losing streaks.
Earlier bullish sentiment was dented somewhat after Fed Chair Jerome Powell ruled out cutting interest rates because he did not expect inflation to come down quickly enough.
“In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said in a statement.
However, traders noticed what the Fed didn’t say this time in its post-meeting statement. The central bank appeared to soften its language about future rate increases by dropping a line from the March statement that said, “the Committee anticipates that some additional policy firming may be appropriate.”
Powell commented to the press after the statement’s release that dropping that language was a “meaningful change” and that the central bank’s June decision would be driven by incoming data.
Ed Moya, senior market analyst at Oanda said Wednesday’s rate increase, which marks the central bank’s 10th consecutive hike, “will likely be the last one in this cycle.”
“The Fed is concerned that tighter credit conditions will weigh on economic activity and hiring, while helping maintain disinflation trend,” Moya said. “Credit tightening is about to cripple the economy and it appears that as long as we don’t get a perfect storm of hotter-than-expected labor and inflation data, the Fed will keep rates on hold for at the very least till the end of the year.”
The SPDR S&P Regional Banking ETF (KRE) declined more than 1%. The regional banking ETF fell more than 6% during Tuesday’s trading session. Shares of PacWest shed nearly 2% after losing about 28% the prior day. Western Alliance shares were down 4.4%.
