Fed Hikes Rates for First Time in Three Years, Sends Stocks Lower
The Federal Reserve raised interest rates for the first time in three years on Wednesday, sending stocks lower and yields higher. The Dow Jones Industrial Average plummeted 631.21 points, or 1.21%, after Chairman Kevin Warsh warned that inflation remains stubbornly high.
The Fed's Federal Open Market Committee voted unanimously to lift the overnight funds rate by a quarter percentage point to a target range of 3.75% to 4%. This marks a shift from July, when the committee held rates steady in a 9-3 split.
Bank stocks led the market lower, with Bank of America and Wells Fargo each declining nearly 3%, while American Express and Goldman Sachs fell almost 4%. The 10-year Treasury yield climbed back above 5% following Warsh's remarks, a level Art Hogan called 'a massive psychological level.'
The increase in rates ended a pause dating to 2023 and came with a signal that at least one more hike is likely this year. Transportation stocks fell, with the Dow Jones Transportation Average down more than 2% and J.B. Hunt plunging over 13% after warning of weaker third-quarter earnings.