Investing.com - The Dow Jones Industrial Average (DJIA) closed at 19792.53 today, down 0.60%, as traders reacted to the Federal Reserve increasing short-term interest rates by 0.25%.
The Nasdaq also closed down at 5436.67, down 0.50%, or 27.16. The S&P 500 closed down as well at 2253.28.
The rate increase was the only hike in interest rates this year and the second since June 2006.
The Dow Jones Industrial Average and the NASDAQ composite were down by 0.16% and 0.11%, respectively, by 11:41 Eastern as traders anticipated the decision. The Dow rose immediately after the news was released, and then sank again by 3 p.m. Eastern.
Today’s meeting marked the Fed’s first conference since the election of Donald Trump. The President-elect has pledged tax cuts and new government spending—policies which may influence the Fed’s outlook for inflation and interest rates.
Rate increases were a rarity during the Obama years.
Economists expect the Fed to raise interest rates a number of times during the coming years. The U.S. economy after nearly a decade of struggles is showing signs of stronger growth. The U.S. economy has averaged about 1% to 2% growth during the Obama presidency. Employment is growing as well as evidenced by recent jobs reports.
But, Janet Yellen, the chair of the Fed, told the U.S. Congress last month that the economy has “more room to run” than economists had expected, suggesting she wasn’t too worried the American economy was at risk of overheating at this time.