Stocks slip af­ter Fed says in­ter­est rates will rise faster

The Denver Post - - BUSINESS - By Marley Jay

NEW YORK» U.S. stocks slipped Wed­nes­day af­ter the Fed­eral Re­serve raised in­ter­est rates and said it ex­pects to in­crease rates two more times by the end of the year. In­vestors bet that sev­eral huge deals are more likely to hap­pen af­ter a fed­eral court cleared AT&T’s $85 bil­lion pur­chase of Time Warner.

Wall Street was al­ready cer­tain the Fed would raise in­ter­est rates Wed­nes­day. The cen­tral bank’s de­ci­sion mak­ers also said they plan to raise rates two more times later this year for a to­tal of four in­creases. In­vestors had de­bated all year if rates would rise three or four times, and some are con­cerned that if rates rise that quickly, it could sti­fle eco­nomic growth be­cause con­sumers and busi­nesses will have to pay more to bor­row money.

The Fed’s pro­jec­tions might have been un­wel­come, but they weren’t a shock: For months there have been signs the econ­omy is get­ting stronger. An­other came on Wed­nes­day, when the La­bor Depart­ment said whole­sale prices climbed at a faster pace in May. The Fed says in­fla­tion is likely to in­crease and projects un­em­ploy­ment will hit a 50year low in a few months, and it wants to keep in­fla­tion un­der con­trol.

“There was noth­ing ter­ri­bly sur­pris­ing in the an­nounce­ment,” said Jeremy Zirin, head of in­vest­ment strat­egy for UBS’s global wealth man­age­ment busi­ness. He said the Fed’s new fore­casts “ap­peared largely to sim­ply re­flect the eco­nomic re­al­ity of the last two or three months.”

He added that the Fed didn’t have a big change of heart ei­ther: the Fed’s pro­jec­tions changed be­cause one ad­di­tional pol­i­cy­maker fore­cast four rate in­creases in­stead of three.

The rul­ing in the AT&T-Time Warner trial sent rip­ples through the me­dia and telecom­mu­ni­ca­tions in­dus­tries. Shares of Twenty-First Cen­tury Fox jumped as in­vestors an­tic­i­pated Com­cast’s of­fer for Fox’s en­ter­tain­ment busi­nesses. It came just af­ter trad­ing ended, as Com­cast an­nounced a $65 bil­lion bid. The rul­ing also gave in­vestors more con­fi­dence that two big takeovers in the health care field will now go through.

The S&P 500 in­dex fell 11.22 points, or 0.4 per­cent, to 2,775.63 af­ter it closed at a four-month high Tues­day. The Dow Jones in­dus­trial av­er­age lost 119.53 points, or 0.5 per­cent, to 25,201.20.

The Nas­daq com­pos­ite slipped 8.09 points, or 0.1 per­cent, to 7,695.70. The Rus­sell 2000 in­dex of smaller-com­pany stocks shed 5.76 points, or 0.3 per­cent, to 1,676.54.points. Both in­dexes fin­ished at record highs Tues­day.

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