US Stocks Slide Amid Fed Rate Hike and Inflation Fears
US stocks experienced a decline on Wednesday after the Federal Reserve raised interest rates for the first time in three years and hinted at further increases to combat high inflation.
The S&P 500 fell by 0.4%, with the Dow Jones Industrial Average dropping 631 points, or 1.2%. The Nasdaq composite remained nearly unchanged after edging down less than 0.1%.
Investors typically prefer lower interest rates because higher rates slow economic growth and reduce stock prices.
However, Fed Chairman Kevin Warsh stated that inflation remains too high, and the US economy appears to be strengthening, which could imply it can withstand further rate hikes.
The median forecast from Fed officials expects the federal funds rate to reach 4.1% by the end of this year, up from its current range of 3.75-4%. Traders are betting on a 38% probability that the Fed may hike rates to 4.25-4.50%.
Bank stocks, such as Huntington Bancshares and Citizens Financial Group, suffered significant losses due to concerns about reduced demand for loans in a slower economy.