Wall Street falls as Fed signals two more hikes this year

Traders work on the floor of the NYSE in New York June 13, 2018. — Reuters pic
Traders work on the floor of the NYSE in New York June 13, 2018. — Reuters pic

NEW YORK, June 14 — US stocks ended a choppy session lower yesterday after the US 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 per cent and 2 per cent, 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 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 per cent target, hitting 2.1 per cent this year and remaining there through 2020.

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

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

“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 US 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 US$85 billion (RM339 billion) deal to buy Time Warner Inc put the spotlight on media and telecom shares, which mostly rose.

Shares of HBO channel owner Time Warner rose 1.8 per cent. AT&T dropped 6.2 per cent in its highest volume day ever, sending the S&P telecom services index down 4.5 per cent.

Shares of other telecom and media companies such as Sprint Corp, CBS Corp and Discovery Inc ended higher.

After the bell, Comcast Corp offered US$65 billion for Twenty-First Century Fox Inc media assets. Twenty-First Century Fox shares were up 0.2 per cent in after-hours trading, after closing the regular session up 7.7 per cent. Comcast shares ended the session down 0.2 per cent. 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 US exchanges. That compares with the 6.7 billion daily average for the past 20 trading days, according to Thomson Reuters data. — Reuters