Stocks fell on Wednesday after the Federal Reserve announced a quarter-point rate hike and promised future hikes.
The Dow Jones industrial average was down 160 points, or 0.5%. The S&P 500 was down 0.2%. The Nasdaq composite was led higher by chipmakers’ gains following strong revenue from advanced microdevices.
While the Fed’s hike represents a slowdown from its half-point increase in December, investors fear the rate hikes could push the economy into recession. In its post-meeting statement, the central bank said, “Continued increases in the target range will be appropriate to achieve a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Stocks hit session lows after Federal Reserve Chairman Jerome Powell said at a press conference that the Fed should be restrained for some time and that the Fed has more work to do. Then stock prices rebounded.
The comments disappointed some investors as some recent signs of easing inflation in the broader economy led investors to expect a dovish tone from the central bank chief.
“I don’t see any signs yet that the Fed is open to rate cuts for 2023,” said Bill Sox, portfolio manager at Brandywine Global. “I don’t see that the Fed is trying for a soft landing. Although they won’t say so, they may like the restorative aspects of a recession and a perfect bear market.”
Wednesday’s losses were contained as fourth-quarter corporate earnings showed largely resilient gains. Peloton Shares rose more than 17% after the fitness equipment company said Net loss decreased year-on-year. Advanced Micro Devices Shares gained more than 8% after the semiconductor company Reported fourth quarter earnings beat.
Wall Street is coming off a strong session at the end of January. The S&P 500 posted its best January performance since 2019, while the tech-heavy Nasdaq Composite had its strongest January in 22 years.
