Market falls after rate hike

Investors sell stocks that the jump would hurt, and the dollar’s value goes up.

Stocks had their worst day in two months after the Federal Reserve raised interest rates Wednesday on the back of a strengthening job market and surprised investors by increasing its forecast for rate hikes next year. The dollar’s value jumped against other currencies, and bond yields climbed to their highest levels in years.

The rate increase, which was only the Fed’s second in the last decade, was widely expected across the market. But investors were surprised to see the Fed project three more increases for 2017, up from a prior forecast of two. Higher rates can slow corporate profits and economic growth.

The Standard & Poor’s 500 index fell 18.44 points, or 0.8 percent, to 2,253.28, its biggest percentage loss since mid-October. The Dow Jones industrial average fell 118.68 points, or 0.6 percent, to 19,792.53. The Nasdaq composite fell 27.16, or 0.5 percent, to 5,436.67.

The yield on the 10-year Treasury note touched its highest level in more than two years and sat at 2.57 percent late Wednesday, up sharply from 2.47 percent a day earlier.

Investors reacted to the Fed’s announcement Wednesday by selling stocks that would be most hurt by higher interest rates.

Utility stocks in the S&P 500 fell 2 percent, and real-estate stocks fell 1.9 percent.

Energy stocks had the sharpest declines among the 11 sectors that make up the S&P 500 and fell 2.1 percent, dropping along with the price of oil. Benchmark U.S. crude fell $1.94 to settle at $51.04 per barrel in New York. Brent crude, the international standard, lost $1.82 to $53.90 a barrel in London.