U.S. stocks sag on Fed report, but dollar up

U.S. stocks fell to their lowest in a week and the dollar jumped as investors assessed the Federal Reserve’s signal that it’s in no rush to raise rates even as inflation rises to its target.

The S&P 500 ended near session lows after briefly pushing higher following the central bank’s decision to hold rates steady. Equities tumbled in the final hour of trading as concern mounted that the Fed may let inflation run hot as it gradually tightens. Treasury yields resumed a march to 3 percent and the dollar strengthened versus major peers, adding to equity headwinds.

Central bank officials may have signaled their willingness to allow inflation to exceed their 2 percent goal somewhat by adding a reference to the “symmetric” nature of their target.

“This week’s government data showed inflation moving closer to its 2 percent target. This adjustment is simply an acknowledgment by the Fed that its inflation forecast is, in fact, playing out as predicted,” Robin Anderson, a senior economist at Principal Global Investors, said in an email. “Since inflation was running below 2 percent, this language indicates that the Fed might be willing to let it run a little above 2 percent for a little while.”

The British pound and the euro traded lower. Emerging-market equities and currencies mostly dropped. Gold and oil gained after the Fed announcement.

Earlier, miners, automakers and technology shares led the Stoxx Europe 600 Index toward its best gain this week, shrugging off declines in most Asian markets.

As U.S. trade officials prepare to visit China for talks Thursday and Friday, the People’s Bank of China weakened its daily currency fixing by more than traders and analysts had expected, raising questions about whether it may devalue further to counter U.S. import tariffs.