January 31, 2023

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Wall Street closed lower after the Fed raised interest rates

Wall Street closed lower after the Fed raised interest rates

  • The Federal Reserve raises interest rates by 50 basis points
  • The Economic Outlook Summary sees a higher policy rate
  • Tesla drops after Goldman cut its price target
  • Dow Jones down 0.42%, S&P 500 down 0.61%, Nasdaq down 0.76%

NEW YORK (Reuters) – U.S. stocks closed lower in volatile trade on Wednesday after the Federal Reserve announced an expected policy rate hike of 50 basis points, but its economic outlook points to higher rates for longer.

The central bank raised interest rates by half a percentage point on Wednesday, forecasting at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near halt in economic growth.

The Fed’s latest quarterly summary of economic outlooks shows that US central bankers see the policy rate — now in the 4.25%-4.5% range — at 5.1% by the end of next year, according to the average estimate of all nine federal policymakers. ten, up from 4.6% at the end of September.

In comments after the statement, Fed Chair Jerome Powell said it was too early to talk about cutting rates as the focus is on making central bank policy restrictive enough to push inflation to the 2% target.

Economic data on Tuesday, which showed consumer inflation slowing for November, increased expectations that a Federal Reserve move to halt interest rate hikes could be on the horizon next year.

“Maybe they’re using this kind of very aggressive point chart forecast to take out any momentum from easing that’s happened in the last couple of months,” said Reese Williams, chief strategist at Spouting Rock Asset Management in Bryn Mawr, Pennsylvania. policymakers said in February.

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“Circumstances have softened, and this is their way of unwinding, they won’t let any easing really happen until the unemployment rate goes up.”

Dow Jones Industrial Average (.DJI) It fell 142.29 points, or 0.42%, to 33,966.35, the Standard & Poor’s 500. (.SPX) It lost 24.33 points, equivalent to 0.61%, to 3,995.32 points, and the Nasdaq Composite. (nineteenth) It fell 85.93 points, or 0.76%, to 11,170.89 points.

Almost all of the 11 major S&P sectors ended the session in negative territory, with healthcare (.SPXHC) The only applicant. Finance (.SPSY)down 1.29%, was the worst performing sector.

Despite the Fed’s statement, US Treasury yields were slightly lower after initially jumping in the wake of the announcement.

The strategy of large interest rate increases by major central banks around the world this year has heightened fears that the global economy could push into recession and hit riskier assets like stocks this year.

Each of Wall Street’s three major averages is on track for its first annual decline since 2018, and its largest annual percentage drop since the 2008 financial crisis.

Tesla Inc (TSLA.O) It fell 2.58% after a Goldman Sachs analyst cut its price target for the electric car maker’s stock.

Charter Communications Company (CHTR.O) It fell 16.38% as brokerages lowered their price targets after the telecoms services company’s massive spending plans to upgrade its higher-speed internet.

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Trading volume on US exchanges reached 12.15 billion shares, compared to an average of 10.55 billion shares for the full session over the last 20 trading days.

Low issues outnumbered high issues on the NYSE by a ratio of 1.39 to 1; On the Nasdaq, the ratio was 1.42 to 1 in favor of declining stocks.

The S&P 500 posted eight new 52-week highs and two new lows; The Nasdaq Composite recorded 82 new highs and 223 new lows.

(Reporting by Chuck Mikolajczak) Editing by Jonathan Otis

Our standards: Thomson Reuters Trust Principles.