Stocks fell on Wall Street and bond yields rose Wednesday after Federal Reserve officials indicated they may begin easing off the acclerator on their massive support for economies and the market sooner than previously thought. The Fed’s chair also said the central bank has begun talking about the potential for pulling back on its $120 billion in monthly bond purchases meant to keep longer-term rates low. The return on the 10-year Treasury note rose to 1.56%.
AP’s prior story follows below.
NEW YORK (AP) — U.S. stocks fell and bond yields rose on Wednesday after Federal Reserve officials indicated they may begin easing off the acclerator on their large support for markets earlier than previously thought.
The S&P 500 was 0.3% lower in afternoon trading following a highly anticipated set of projections by Fed policymakers revealed that a number of them see short-term rates climbing half a percentage point by late 2023. The Fed’s chair also said it has begun talking about the potential for pulling back on its $120 billion in monthly bond purchases intended to keep longer-term rates low.
Super-low interest rates are among the main fuel sources for the stock market’s rocket trip to records, using its most recent coming on Monday. Investors’ immediate reaction to the Fed’s remarks was to send stocks lower and bond yields higher. However, the moves called the Fed’s seat, Jerome Powell, said in a press conference that any changes are probably still a ways apart.
The Dow Jones Industrial Average has been 174 points lower, or 0.5%, at 34,124, as of 3:20 p.m. Eastern time. It was down as many as 382 points shortly after the Fed’s announcement. The Nasdaq composite fell 0.2 percent.
In the bond market, the return on the 10-year Treasury increased to 1.54percent from 1.50% late Tuesday. The two-year yield, which moves more closely together with expectations for Fed policy, climbed to 0.20% from 0.16 percent.
In his press conference after the Fed’s announcement, Powell said the larger near-term change for markets will be when the Fed slows its $120 billion in monthly bond purchases. He said again that they will last until”substantial further progress has been made” in obtaining the economy to full employment and costs to be stable. But he confessed that states have improved enough to begin discussing them.
“You can think about this assembly as the speaking about talking about meeting,” he said.
A recent burst of inflation has raised worries that the Fed might need to tighten the spigot on its own support. Prices are leaping for used cars, airfares and other items across the economy as it roars out of its pandemic-caused coma. The consumer price index surged 5 percent in May from a year earlier, for instance.
Fed policymakers increased their hopes for inflation this season on Wednesday. The median projection to the Fed’s favorite measure of inflation was for 3.4%, up from 2.4% in March.
But the Fed still sees the burst being just temporary as the economy works its way through supply shortages and other short-term factors. Fed officials watch inflation dropping to 2.1% next year and 2.2% in 2023.
Oracle dropped 5.3% for the largest loss in the S&P 500 after it laid out investment plans that could drag on its upcoming profitability.
Furniture firm La-Z-Boy fell 10.7% after cautioning investors who radically higher prices it’s paying for raw materials will melt just how much profit it makes from each $1 of sales.
General Motors rose 1.9percent after saying it’s going to increase spending on electric and autonomous vehicles and also include two U.S. battery mills.