While you were sleeping: Wall Street ends mixed after Fed lifts rates

Wall Street's broadest index gave up earlier gains but the Dow Industrials rose sharply after the US Federal Reserve announced its second interest rate increase this year, signalling another rate hike as well as a start to trimming its balance sheet this year.

"Our decision to make another gradual reduction in the amount of policy accommodation reflects the progress the economy has made, and is expected to make," Fed chairwoman Janet Yellen said at a press conference.

At the end of its two-day meeting, the Federal Open Market Committee announced its decision to lift the target range for its fed funds rate by a quarter percentage point to between 1% and 1.25%. Minneapolis Fed President Neel Kashkari voted against the increase.

"Near term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely," the Fed said in a statement.

"The committee currently expects to begin implementing a balance sheet normalisation programme this year, provided that the economy evolves broadly as anticipated."

US Treasury bonds rallied, pushing yields on the 10-year note to 2.138%, up slightly from its level before the Fed announcement but down from 2.206% on Tuesday..

Dow lifts 46 points
Wall Street ended mixed in a choppy session punctuated by the Fed announcement. At the close of trading in New York, the Dow Jones Industrial Average was up 46.09 points, or 0.2%, to 21,374.56. However, the Nasdaq Composite Index eased 0.4% to 6194.89 and the Standard & Poor's 500 Index slipped just 0.1% to 2437.92. The Dow touched a record high 21,379.32 earlier in the day.

"Everyone is concerned about the path of interest rate increases as well as the methodology for reducing the balance sheet, and this is creating a little bit of volatility intraday," Chad Morganlander, a money manager at Stifel, Nicolaus & Co in Florham Park, New Jersey, told Bloomberg.

"The volatility should creep higher in the course of the summer months as Fed moves further in adjusting the balance sheet."

The Fed kept to earlier predictions it might raise its target rate once more this year.

"The Fed announcing an update to their reinvestment principles leaves September open," said Gennady Goldberg, interest rate strategist at TD Securities, told Reuters.

"The start of balance sheet runoff and the fact that they haven't slowed their projected path of rate hikes suggest they can do both balance sheet and rate hikes at the same time."

No word on Yellen's future
Meanwhile, Ms Yellen dodged questions about whether she would stay on for another term if President Donald Trump asks her to stay. Her term ends in February.

"I fully intend to serve out my term as chair," she said at the press conference in Washington DC, adding, "I have not had conversations with the president about future plans," Bloomberg reported.

The Dow rose as gains in shares of Travelers Cos and Home Depot, up 1.5% and 1.4% respectively, outweighed slides in shares of Apple, Intel and Microsoft all of which fell about 1%. 

Investors also sold other technology shares with the Nasdaq losing ground and tech stocks in the S&P 500 falling 0.5%.  

In Europe, the Stoxx 600 Index ended the day with a 0.3% slide from the previous close. France's CAC40 Index fell 0.4%, as did the UK's FTSE 100 Index. Germany's DAX Index rose 0.3%.

(BusinessDesk)