Northwest Arkansas Democrat-Gazette
STOCKS TAKE
nose dive after Fed raises rates.
NEW YORK — Stocks gave up a big rally and took a dive in afternoon trading Wednesday after the Federal Reserve raised interest rates and said it plans to keep raising them next year. The market finished at its lowest level since September 2017.
The Dow Jones industrial average fell 351.98 points, or 1.5 percent, to 23,323.66. The S&P 500 skidded 39.20 points, or 1.5 percent, to 2,506.96. It has tumbled 14.5 percent in the past three months, including a loss of 9.2 percent this month.
The Nasdaq composite gave up 147.08 points, or 2.2 percent, to 6,636.83. The Russell 2000 index — which has experienced broader declines than the rest of the market — fell 27.95 points, or 2 percent, to 1,349.23.
The Dow lost 513 points at its lowest point. Before the Fed’s decision was announced at 1 p.m. Central Standard Time, it was up 381 points.
The U.S. central bank said it expects to increase interest rates at a slightly slower pace next year and that it isn’t planning any changes in the gradual shrinking of its large bond portfolio. Investors appeared to hope the Fed would unveil a sharper slowdown in interest rate increases and other credittightening policies because economic growth is likely to
slow down.
The Fed raised its short-term interest rate for the fourth time this year, to a range of 2.25 percent to 2.5 percent. The Fed’s benchmark rate is at its highest point since 2008, which means higher borrowing costs for many consumers and businesses.
The Fed is now forecasting two increases in rates in 2019 instead of three. The central bank expects the long-term level of its main interest rate will be 2.8 percent, down from an earlier projection of 3 percent.
Bond prices rose after the Fed’s announcement. The yield on the 10-year Treasury note fell to 2.78 percent from 2.84 percent immediately before the Fed’s announcement and 2.82 percent late Tuesday. That’s a substantial move for the benchmark lending rate.
The yo-yo movements for the stock market were a result of markets trying to parse Fed Chairman Jerome Powell’s comments, which essentially were that the economy is strong enough to warrant a rate increase now, but not strong enough to need three rate increases, as the Fed had indicated a few months ago.
“Chairman Powell was threading the needle today,” said Frances Donald, head of macroeconomic strategy at Manulife Asset Management. “He had to say that the economic picture is not as good as three months ago, while also saying that the pillars of the economy remain intact. And markets have to react, live, to that ‘on the one hand, on the other hand’ that Powell has to play in this economy.”
Internet, technology and consumer-focused companies dropped. Facebook fell sharply after The New York Times reported that the social media network gave companies more access to users’ personal data than it has previously said. The report said Facebook had arrangements with more than 150 companies — including Microsoft, Amazon, Spotify and Netflix — that let different companies read, write and delete users’ private messages and see the names of users’ friends or their news feeds, all without their consent.
Separately, the District of Columbia sued Facebook for allowing Cambridge Analytica, a data-mining firm that worked with Donald Trump’s presidential campaign, to improperly access data from as many as 87 million Facebook users.
Facebook’s stock lost 7.2 percent to $133.25. It’s down 39 percent since late July on concerns about a slowdown in user growth, multiple privacy and safety scandals, and the possibility of increased regulation in the future.
FedEx plunged after reporting that international shipping, especially in Europe, fell in the latest quarter. FedEx also said the U.S.-China trade dispute is affecting its business. The shipping company posted a smaller profit than analysts expected and said it will cut spending and offer buyouts to some workers to help make up for the shaky results.
FedEx stock lost 12.2 percent to $162.51. It has dropped 35 percent this year. Rival UPS lost 3 percent to $94.32 and has slumped 21 percent in 2018.
Despite the day’s losses, David Kelly, the chief global strategist for JPMorgan Funds, said the market will ultimately react to the health of the economy. He said the Fed’s moves Wednesday made sense and could prolong the already long-lasting growth in the United States.
“The Fed behaving in a very prudent, balanced way increases the possibility of a very balanced expansion” continuing, he said.
Oil prices turned higher after plunging a day earlier on worries about rising supplies and weakening global growth, which could weigh on demand.
Benchmark U.S. crude climbed 2.1 percent to $47.20 a barrel in New York. It dropped 7 percent Tuesday and closed at a 16-month low, and it has fallen almost 40 percent since Oct. 3. Brent crude, used to price international oils, rose 1.7 percent to $57.24 a barrel in London.
Wholesale gasoline rose 2.7 percent to $1.39 a gallon, and heating oil added 2.9 percent to $1.81 a gallon. Natural gas lost 2.9 percent to $3.73 per 1,000 cubic feet.
Energy company stocks fell again. They’re trading at their lowest levels since early 2016.
The dollar was down for the day but recovered slightly after the Fed’s move. The dollar slipped to 112.36 yen from 112.53 yen. The euro rose to $1.1368 from $1.1357, and the British pound dipped to $1.2621 from $1.2639.
European stocks rose after Italy’s government reached an agreement with the European Commission on its budget plans. The Italian FTSE MIB jumped 1.6 percent. Britain’s FTSE 100 rose 1 percent while Germany’s DAX added 0.2 percent and the CAC 40 in France rose 0.5 percent.
Japan’s Nikkei 225 index fell 0.6 percent, and South Korea’s Kospi rose 0.8 percent. Hong Kong’s Hang Seng was 0.2 percent higher.
Gold rose 0.2 percent to $1,256.40 an ounce. Silver added 0.8 percent to $14.82 an ounce. Copper climbed 1.9 percent to $2.72 a pound.