The U.S. stock market closed mostly lower on Wednesday after the Federal Reserve raised interest rates for the first time in over three years. This rate increase, by 25 basis points to a range of 3.75%-4%, is the first since July 2023.
Decline in Stock Indices
The Dow Jones Industrial Average dropped by 631.33 points, or 1.21%, to 51,461.78 points. Additionally, the S&P 500 fell by 33.92 points, or 0.45%, to 7,551.81 points. On the other hand, the Nasdaq Composite remained nearly unchanged at 25,978.43 points.
Market Reaction to Rate Hike
The Federal Reserve also forecasted another increase of 25 basis points later this year. However, the initial market reaction to this decision was positive, but the trend changed after the speech by Jerome Powell, the Federal Reserve Chair, who emphasized ongoing price pressures. He stated, "The reality is that inflation is very high and has persisted for a long time."
Following these developments, the yield on the 10-year U.S. Treasury bond rose above 5%, trading around 5.02%. Additionally, bank stocks declined amid concerns that rising interest rates and high borrowing costs could impact lending and economic activities. Shares of Bank of America, Wells Fargo, Goldman Sachs, and Citigroup fell by about 3%, while JPMorgan Chase shares dropped by about 1%.
On the other hand, Intel shares rose following reports that the company is negotiating with South Korean memory maker SK Hynix to produce semiconductors in the United States, helping to limit the decline in Nasdaq stocks. Furthermore, the U.S. dollar index increased by about 0.6% to 100.21, while gold prices fell by 0.6% to $4,266 per ounce. Meanwhile, West Texas Intermediate crude oil prices decreased by 3.7% to $101.87 per barrel.
In Europe, stock markets were up, with the STOXX Europe 600 index rising by 0.46% to 637.09 points. The markets in the UK and Germany also grew by 0.28% and 0.53%, respectively.
