Wall Street Slides After Fed Raises Rates
U.S. stocks fell the most in two months on Wednesday after the Federal Reserve raised interest rates by a quarter point and signaled hikes could come next year at a faster pace than some expected.
Energy stocks weighed the most on the S&P 500 after a sharp drop in U.S. crude oil prices.
The Fed's decision to raise rates comes as President-elect Donald Trump, who will be sworn in next month, is seen cutting taxes and increasing spending on infrastructure.
Fed Chair Janet Yellen indicated the central bank was, at the margins, adapting to Trump, as some committee members began shifting fiscal policy assumptions to slightly faster growth and lower unemployment.
Stocks sold off during Yellen's press conference after the Fed statement. She walked back from recent comments that hinted the Fed could allow the economy to run hot for a certain time, meaning inflation could slightly overshoot and unemployment could remain low before the Fed felt the need to tighten policy faster.
"Yellen seemed to dampen expectations about her willingness to allow that to happen. If the Fed is seen less willing to let the economy run hot, markets are going to react," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
Markets had all but priced in a rate increase by the Fed, but the faster pace of increases seen next year may give traders an excuse to cash-in the recent gains.
Since the Nov. 8 U.S. presidential election, stocks have rallied on bets that Trump's expected business-friendly policies will stimulate the economy. However, some market participants are concerned that equities are pricing in a very favorable scenario, leaving them vulnerable.
The Dow Jones industrial average fell 118.68 points, or 0.6 percent, to 19,792.53, the S&P 500 lost 18.44 points, or 0.81 percent, to 2,253.28 and the Nasdaq Composite dropped 27.16 points, or 0.5 percent, to 5,436.67.
U.S. crude prices fell nearly 4 percent, the most since mid-July, on renewed concerns about an oil glut sparked by rising U.S. crude inventories in storage.
The U.S. dollar strengthened across the board, its index hitting the highest level in nearly 14 years, further weighing on oil and other commodities priced in the U.S. currency.
Exxon Mobil declined 2.2 percent and was the largest drag on the S&P 500.
About 8.49 billion shares changed hands in U.S. exchanges, above the 7.3 billion daily average over the last 20 sessions.
Declining issues outnumbered advancing ones on the NYSE by a 4.12-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored decliners.
The S&P 500 posted 30 new 52-week highs and 1 new low; the Nasdaq Composite recorded 110 new highs and 51 new lows.