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JUNE 13, 2018 / 5:42 pm
Wall Street falls as Fed signals two more hikes this year
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.
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