Stocks dip after Fed hikes interest

NEW YORK » U.S. stock indexes dipped Wednesday after the Federal Reserve took the latest step in its campaign to pull interest rates gradually higher.

The decision to raise the federal funds rate for a third time this year was widely expected, and stocks initially climbed following the announcement. But the gains faded in the last 30 minutes of trading after Fed Chairman Jerome Powell finished speaking at a news conference. The sharpest losses came from financial stocks, hurt by a drop in Treasury yields, which can crimp lending profits for banks.

The S&P 500 fell 9.59 points, or 0.3 percent, to 2,905.97 after being up as much as 0.5 percent earlier in the day. The Dow Jones industrial average fell 106.93, or 0.4 percent, to 26,385.28, and the Nasdaq composite lost 17.11, or 0.2 percent, to 7,990.37.

Powell said that the U.S. economy is in a “particularly bright moment,” which would point to continued increases in rates. But he also said that inflation doesn’t seem likely to spike, which would allow the Fed to continue on its gradual path to raise rates off the record lows they set following the 2008 financial crisis.

Investors spent the most energy Wednesday parsing over a phrase that the Fed dropped from its written statement following its rate decision, one that has been included for years, about how the central bank is being “accommodative” and keeping rates low. Did that mean the Fed would shade toward being less aggressive or more?

But Powell said in the press conference that losing the phrase was not a signal of any change in policy expectations.

Investors closely follow every clue about interest rates, which affect the flow of money and the broad economy, because high rates in the past have been the death knell for economic expansions and bull runs for stocks.