Stocks dove sharply into negative territory after the Federal Reserve signaled Wednesday that it has not ruled out another interest rate hike at its March meeting despite acknowledging that it is “closely monitoring” recent turbulence in financial markets and slowing global growth. Wall Street had…
Stocks dove sharply into negative territory after the Federal Reserve signaled Wednesday that it has not ruled out another interest rate hike at its March meeting despite acknowledging that it is "closely monitoring" recent turbulence in financial markets and slowing global growth.
Wall Street had been hoping the Fed would use its post-meeting policy statement to send a message that would, in effect, dial back the prospect for a rate hike at its March meeting and lower the likelihood of four quarter point hikes in total for the year.
But the Fed didn't go that far, and disappointed investors dumped stocks as the question marks related to Fed policy remained open.
Wall Street might have had unrealistic expectations that the Fed would rule out a March rate hike or veer so early from its stated hope to do four quarter-rate hikes in 2016, says Robert Pavlik, chief market strategist at Boston Private Wealth.
“I thought the policy statement was pretty neutral,” Pavlik told USA TODAY. “It leaves the door open to a rate hike in March, and that is what the market is concerened about. The market wanted some reassurance that it was not going to happen and it didn’t get that from the Fed statement.”
As of 3:30 p.m. ET, the Dow Jones industrial average was down about 240 points, or 1.5%. The broader Standard & Poor's 500 was off 1.3% and the Nasdaq composite was suffering a 2.2% drop. All three major stock gauges were off their earlier lows.
The U.S. central bank broke from a two-day meeting at 2 p.m. ET and issued its latest policy statement. Wall Street was eagerly awaiting clues as to whether the Fed will dial back its aggressiveness on rate hikes in 2016.
The Dow and S&P 500 were slightly positive leading into the announcement and turned negative a few minutes later. The Nasdaq, down for most of the day, sank lower as well. As the afternoon wore on, all three surpassed their earlier session lows of the morning.
The Fed, which raised rates off zero back in December, has said it is looking to add an additional four quarter-point hikes this year. But that pace of hikes now seems aggressive to Wall Street given the market volatility and slowing growth at the start of 2016.
"It's not what the Fed does today, but more about what it says that matters for risk assets," Thomas Tzitzouris, a fixed income strategist at Strategas Research Partners, told clients in a research note. "The Fed appears unlikely to do anything today, but what the central bank says will determine if March rate hike odds push closer to zero, and with it brings ... a broader relief rally."
Gains in the the Dow being held back by two of its well-known components. Apple (APPL) shares were down about 5% after the company topped quarterly profit estimates but said sales of iPhones came in at the slowest pace since its introduction.
Shares of Boeing (BA) cratered more than 6% after the airplane maker cut its full-year profit and sales forecast way below Wall Street estimates.
Stocks once again were following oil prices - initially falling as oil slipped and then recovering after oil rallied. U.S.-produced crude was up 3% to $32.47 after earlier falling as low as $30.14 a barrel.
Asian markets were mixed with China’s Shanghai composite index dropping 0.5% to close at 2,735.56, after diving 6.4% on Tuesday, its lowest level since December 2014.
Japan’s Nikkei 225 index gained 2.7% to close at 17,163.92 while Hong Kong’s Hang Seng index rose 1% to finish at 19,052.45.
European shares were higher: Germany’s DAX index was up 0.2%, France’s CAC 40 rose 0.2% and Britain’s FTSE 100 gained 0.8%.
Click here to view full article