Fed Hikes Interest Rates, Warns of Further Increases Amid High Inflation

The Federal Reserve raised interest rates for the first time in three years and hinted at further increases to combat high inflation. The decision sent US stocks lower, with the S&P 500 falling 0.4%, the Dow Jones Industrial Average dropping 631 points or 1.2%, and the Nasdaq composite slipping by less than 0.1%. Investors generally prefer lower interest rates as they slow economic growth and decrease stock prices.

The Fed's decision was met with caution from Wall Street, where bank stocks fell sharply due to reduced demand for loans in a slower economy. The two-year Treasury yield jumped to 4.74% after the announcement, while the longer-term 10-year Treasury yield rose to 5.01%. Stocks of oil companies also weighed on the market as Brent crude prices dropped 2.7%.

However, some influential stocks in the artificial-intelligence industry helped limit the market's losses, with Nvidia rising 0.8% and Advanced Micro Devices climbing 1.6%. The European Central Bank hiked rates last week to combat inflation, a global issue. Despite the Fed's efforts, President Donald Trump has been advocating for lower interest rates.