US stocks dip as Fed hikes
US stocks dipped slightly, in choppy trade, after the Federal Reserve raised US interest rates.
Broadly this was viewed as a moderate reaction to the 0.25 percentage point hike.
The Fed raised interest rates to 1.75 per cent and forecast at least two more hikes for 2018, signalling growing confidence that US tax cuts and government spending will boost the economy and inflation and lead to more aggressive future tightening.
The hike was widely expected, and new Fed chairman Jerome Powell said in a news conference after the rate-hike announcement that the US central bank was trying to take the “middle ground” in raising rates.
“That’s a Fed that really feels good about the economy, not only this year but into next year,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis. “The initial response by equities was to go up because of the confidence the Fed seems to have in the economy. But with bond yields going up in anticipation of more hikes . . . that kind of scared the stock market again.”
Financials, which benefit from a higher rate environment, briefly extended gains in the wake of the announcement but lost ground to close down 0.03 per cent. Companies sensitive to higher rates such as utilities, down 0.39 per cent, and real estate, off 0.93 per cent, were under pressure.
Market participants are still trying to decipher the number of rate rises this year — whether the Fed will stay at three increases or whether a fourth hike is possible.
—