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Wall Street closes lower as Fed officials project rate hikes for 2023

EconomyJun 16, 2021 06:48PM ET
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© Reuters. FILE PHOTO: A Wall Street sign is pictured outside the New York Stock Exchange in the Manhattan borough of New York City, New York, U.S., April 16, 2021. REUTERS/Carlo Allegri/File Photo

By David French

(Reuters) - The three main Wall Street indexes all closed down on Wednesday, as U.S. Federal Reserve officials unnerved investors with indications that the central bank could begin rising interest rates in 2023, a year earlier than expected.

New projections saw a majority of 11 of 18 U.S. central bank officials pencil in at least two quarter-percentage-point rate increases for 2023. Officials also pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

The Fed cited an improved economic outlook, with overall economic growth expected to hit 7% this year. Still, investors were surprised to learn officials were mulling rate hikes earlier than 2024.

"At first blush, the dot plot which projected two hikes by 2023 was more hawkish than expected, and markets reacted as such," said Daniel Ahn, chief U.S. economist at BNP Paribas (OTC:BNPQY).

The benchmark 10-year Treasury yield rose on the Fed news, while the dollar index, which tracks the greenback against six major currencies, rose to a six-week peak.

With inflation rising faster than expected and the economy bouncing back quickly, the market had been looking for clues of when the Fed may alter the policies put into place last year to combat the economic fallout from the pandemic, including a massive bond-buying program.

The Fed reiterated its promise to await "substantial further progress" before beginning to shift to policies tuned to a fully open economy. It also held its benchmark short-term interest rate near zero and said it will continue to buy $120 billion in bonds each month to fuel the economic recovery.

"Chair Powell has signaled, while the committee is not yet ready to taper, it is now in the minds of the committee. They've retired the phrase 'thinking about thinking about tapering', and we expect that in the next few meetings, the committee will likely formally start discussions of tapering," BNP's Ahn said.

The Dow Jones Industrial Average fell 265.66 points, or 0.77%, to 34,033.67, the S&P 500 lost 22.89 points, or 0.54%, to 4,223.7 and the Nasdaq Composite dropped 33.17 points, or 0.24%, to 14,039.68.

Only two of the S&P's 11 main sector indexes ended in positive territory: consumer discretionary and retail.

The decliners were led by utilities, materials, and consumer staples.

Volume on U.S. exchanges was 10.90 billion shares, compared with the 10.38 billion average over the last 20 trading days.

The S&P 500 posted 25 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 95 new highs and 30 new lows.

Wall Street closes lower as Fed officials project rate hikes for 2023
 

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Comments (17)
Steffen vdm
Steffen vdm Jun 17, 2021 12:22AM ET
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Let's price these hikes in in today's market! Oh wait....
Jeremy Thornton
Jeremy Thornton Jun 16, 2021 8:18PM ET
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Wall Street is the worst. All rich and crying because they are going to end corporate welfare in a year and a half from now? Awful examples of human beings.
Patrick Joly
Patrick Joly Jun 16, 2021 7:20PM ET
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In 3 days, the market will have already forgot this news. About 250 events will impact the market before 2023. I dont see anything unusual here. Wake up people!
Jack Hoodie
Jack Hoodie Jun 16, 2021 7:20PM ET
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exactly what I was thinking
Reynalta Reynalta
Reynalta Reynalta Jun 16, 2021 7:20PM ET
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up end up it is good chancevfor
Nagy Róbert
Nagy Róbert Jun 16, 2021 3:00PM ET
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You are negative...we knew it all....it dosen't mater..hope, faith, up and up it is good chancevfor everyone✌️
Always Long
Always Long Jun 16, 2021 2:56PM ET
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Up tomorrow a lot!
Matteo Settimo Zamboni
Matteo Settimo Zamboni Jun 16, 2021 2:54PM ET
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So what…we already knew this…just bear spec opp
Alexander Stinson
Alexander Stinson Jun 16, 2021 2:38PM ET
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bears rise up
Francesco Lucchesi
Francesco Lucchesi Jun 16, 2021 1:21PM ET
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stocks are so cheap. SP should be at least 6000
Jouni Matero
Jouni Matero Jun 16, 2021 1:21PM ET
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I hope you're just sarcastic and if not you're way out of this reality, on the other hand so are stock valuations already but you still want almost 50% more. Lol.
Hugo paparazzo
Hugo paparazzo Jun 16, 2021 1:21PM ET
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He meant 6000 Brazilian real.
Jouni Matero
Jouni Matero Jun 16, 2021 1:04PM ET
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My prediction, FED does nothing new and market rewards this with ATH, which however makes no sense.
Francesco Lucchesi
Francesco Lucchesi Jun 16, 2021 1:04PM ET
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exactly
Meru Pet
Meru Pet Jun 16, 2021 1:01PM ET
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so what's up?
William Bailey
William Bailey Jun 16, 2021 12:24PM ET
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It will not matter if the Fed continues to give-away credit-cash to the markets … the liquidity is being gobbled up by undulations in crypto !! And, 120b a month will not supply the needed liquidity to keep the markets going up
Jouni Matero
Jouni Matero Jun 16, 2021 12:24PM ET
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Everybody should also understand that printer money ruins economy over the time and if this just keeps on going it will destroy us.
Mitchel Pioneer
Mitchel Pioneer Jun 16, 2021 11:50AM ET
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Another magical intraday "recovery" of losses.  Can't have a loss two days in a row.  Of course not, in the US Ponzi Scheme, greatest investment fraud in history, losses must be dealt with the day after they occur, of course on a schedule as predictable as the rising tide.  Welcome to the biggest investment joke on earth.
Darryl Allen
Darryl Allen Jun 16, 2021 11:50AM ET
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You say the same thing every day. At least try using different words.
Matt Novakovich
Matt Novakovich Jun 16, 2021 11:50AM ET
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Darryl Allen cause it's the same message. and true
MAHENDRA TALREJA
MAHENDRA TALREJA Jun 16, 2021 10:56AM ET
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Markets will bounce back
Mike Chen
Mike Chen Jun 16, 2021 10:16AM ET
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Fed will not change anything! American will celebrate independence day with ath in market! Pandemic is history!
Jouni Matero
Jouni Matero Jun 16, 2021 10:16AM ET
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So simple, pandemic is over and everything's fixed by that. Lol.
Chethan Chethan
Chethan Chethan Jun 16, 2021 10:11AM ET
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what about tommrow market
nssskk nath
nssskk nath Jun 16, 2021 9:36AM ET
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FED will continue its strategic plan of supporting the economy as there is no need at this moment to give much importance to the spikes in inflation levels. Inflation will consolidate soon in the coming months and Fed will not unnecessarily disturb it's original plan.
Jouni Matero
Jouni Matero Jun 16, 2021 9:36AM ET
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Alice In Wonderland
Yoyogi Shark
Yoyogi Shark Jun 16, 2021 9:36AM ET
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Indeed, FED and other central banks want to overheat the global economy and keep pumping equities and other assets up. The question is not whether they continue or not but rather WHY.
 
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