Despite the 120 point drop in the Dow today after the Fed announced another rate increase and made it likely there will be four increases during 2018 instead of the hoped for three, but the fact is the index was up 40 points as late as 3 pm before plummeting drastically in the last half hour.  This just means that investors are digesting a lot of information and that, with the swings being what they’ve been we could just as easily see a 3-digit rise tomorrow as not, especially since the impact of the rate increase has not yet hit the financial sector.  It does however look now like the Fed will finally hit its 2 percent inflation target this year, and that is very good news.  The sooner that happens, the sooner the market volatility will start to calm down after over ten years of schizophrenia.  Volume was above average at 7.1 billion. 

wed  JUNE 13, 2018 / 5:42 pm 

Wall Street falls as Fed signals two more hikes this year

Caroline Valetkevitch

DJ:  25,201.20  -119.53       NAS:  7,695.70  -8.09          S&P:  2,775.63  -11.22      6/13

(Reuters) - U.S. stocks ended a choppy session lower on Wednesday after the U.S. Federal Reserve raised interest rates as expected and projected a slightly faster pace of rate hikes this year.  Two more hikes are now expected by the end of this year, compared with one previously.

The central bank, which raised its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, also dropped its longstanding pledge to stimulate the economy “for some time.”

Stocks were volatile after the statement but ended near the lows of the session, and selling was broad-based, with most S&P sector indexes ending lower. The Cboe Volatility index .VIX rose.  “The expectation now is for four rate increases in total in 2018. Consensus had been more like three, moving toward four, so I think that’s a bit of a surprise,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management in Chicago.  “It seems as if the Fed is much more confident now in inflation reaching, in fact maybe breaching a little bit, their target, so they are pulling forward some of the rate increases.”  Fresh projections from policymakers suggested that inflation would run above the Fed’s 2 percent target, hitting 2.1 percent this year and remaining there through 2020. 

The Dow Jones Industrial Average .DJI fell 119.53 points, or 0.47 percent, to 25,201.2, the S&P 500 .SPX lost 11.22 points, or 0.40 percent, to 2,775.63 and the Nasdaq Composite .IXIC dropped 8.10 points, or 0.11 percent, to 7,695.70. 

S&P financials .SPSY, which tend to benefit from rising interest rates, ended down 0.3 percent. 

“The financials are a bit of a puzzle. There’s always a lag between the increases in deposit rates and fund costs and interest on loans,” said Robert Eisenbeis, vice chairman and chief monetary economist at Cumberland Advisors in Sarasota, Florida.   “There’s some processing and digesting going on.”  Traders of U.S. short-term interest-rate futures increased bets the Fed will raise rates again this year and next after the Fed’s statement. 

A ruling Tuesday that approved AT&T Inc’s (T.N) $85 billion deal to buy Time Warner Inc (TWX.N) put the spotlight on media and telecom shares, which mostly rose.  Shares of HBO channel owner Time Warner rose 1.8 percent. AT&T dropped 6.2 percent in its highest volume day ever, sending the S&P telecom services index .SPLRCL down 4.5 percent.  Shares of other telecom and media companies such as Sprint Corp (S.N), CBS Corp (CBS.N) and Discovery Inc (DISCA.O) ended higher.  After the bell, Comcast Corp (CMCSA.O) offered $65 billion for Twenty-First Century Fox Inc (FOXA.O) media assets. Twenty-First Century Fox shares were up 0.2 percent in after-hours trading, after closing the regular session up 7.7 percent. Comcast shares ended the session down 0.2 percent.

Declining issues outnumbered advancing ones on the NYSE by a 1.99-to-1 ratio. 

The S&P 500 posted 40 new 52-week highs and two new lows; the Nasdaq Composite recorded 151 new highs and 24 new lows. 

About 7.1 billion shares changed hands on U.S. exchanges. That compares with the 6.7 billion daily average for the past 20 trading days, according to Thomson Reuters data.