While you were sleeping: UPDATED US stocks fall as Fed hikes, signals more
Federal Reserve policymakers unexpectedly predict three quarter-point rate hikes next year.
Wall Street and US Treasury bonds moved lower, while the greenback strengthened after the Federal Reserve increased its key interest rate for the first time in a year and signalled an accelerating pace of increases in next year's borrowing costs.
"In view of realised and expected labour market conditions and inflation," the Federal Open Market Committee said it agreed to raise its target interest rate by 25 basis points between 0.5% and 0.75%. The decision was unanimous.
The increase had been widely anticipated but increases in the years ahead were not.
Fed policymakers predict three quarter-point rate hikes next year, up from the two expected in the previous forecasts, based on median estimates for the fed funds rate of 1.375% in 2017.
"Job gains have been solid in recent months and the unemployment rate has declined," the Fed stated.
"Market-based measures of inflation compensation have moved up considerably but still are low."
Stocks fall from near record highs
After the mid-afternoon announcement, stocks on Wall Street fell from near record highs and zigzagged before heading lower.
At the close, the Dow Jones Industrial Average was down 118.68 points, or 0.6%, to 19,792.53, its worst day since October.
The Nasdaq Composite Index dropped 0.5% to 5436.67 and the Standard & Poor's 500 Index shed 0.8% to 2253.28.
In the Dow, slides in shares of Exxon Mobil and those of Verizon, down 1.3% and 0.8% respectively, outweighed gains in shares of American Express and Goldman Sachs, which both traded 1.5% higher.
US Treasurys fell, pushing yields on 10-year notes to 2.523% – the highest yield since September 2014 – from 2.479% on Tuesday, while yields on the two-year note rose to the highest in seven years, according to Bloomberg.
Separately, a Commerce Department report showed retail sales rose less than expected in November, rising 0.1%, following a 0.6% gain in October.
Even so, "today's report does little to change the multi-month trend of strong consumption growth," Andrew Hollenhorst, an economist at Citigroup in New York, told Reuters.
In Europe, the Stoxx 600 Index ended the day with a 0.5% slide from the previous close.
The UK's FTSE 100 Index fell 0.3%, Germany's DAX Index shed 0.4% and France's CAC 40 Index dropped 0.7%.
Shares of Switzerland's Actelion sank 9% after Johnson & Johnson said it ended talks about a potential deal with the drugmaker.
(BusinessDesk)
Margreet Dietz
Thu, 15 Dec 2016
Thu, 15 Dec 2016
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While you were sleeping: UPDATED US stocks fall as Fed hikes, signals more
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