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S&P 500 in Red as Fed's Forecast for Sooner Liftoff Sours Sentiment

Stock MarketsJun 16, 2021 04:12PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 ended in the red Wednesday after the Federal Reserve penciled in two interest rates hikes by the end of 2023 amid expectations for stronger growth and inflation.     

The S&P 500 fell 0.53%, and the Dow Jones Industrial Average was down 0.77%, or 265 points, and the Nasdaq Composite was down 0.24%.

The Federal Reserve kept interest rates and monthly bond buying steady, though it signaled that it could hike rates sooner than previously expected.

The Fed hiked its interest-rate outlook in 2023 to 0.6% from previous projections of 0.1% in March, signaling two 0.25% rate hikes, the Fed’s Summary of Economic Projections showed. The move suggests the central bank is starting to take the pace of inflation more seriously. 

"[A] majority of meeting participants now expect higher key rates as early as 2023, suggesting that the Fed is accelerating its policy normalization timetable under the impression of rising price risks," Commerzbank (DE:CBKG) said.

In the press conference that followed, however, Fed Chairman Jerome Powell attempted to downplay the hawkish outlook on rates.

"The projections are individual projections and not a committee forecast ... they're not a plan," Powell said. "Discussing liftoff now would be highly premature."

Treasury yields jumped sharply on the news as investors sold bonds on expectations of rising rates. 

Growth sectors of the market like tech, which typically boasts higher valuation that are unattractive in a rising rate environment, pared some of their post-Fed losses, but ultimately ended lower.     

Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL),  Amazon.com (NASDAQ:AMZN) and Facebook (NASDAQ:FB) ended the day mixed. 

Oracle (NYSE:ORCL), meanwhile, fell 6% after its softer second-quarter guidance offset first-quarter results that beat on both the top and bottom lines.

Cyclicals, which tend to move in tandem with an improving economy, were also lower, though financials were higher as bank stocks were boosted by rising rates.  

Energy stocks were lower as oil prices pared some of their recent gains, though remained close to October 2018 highs, as weekly U.S. crude stockpiles fell more than expected.

Crude oil inventories fell 7.355 million barrels last week, compared with analysts' expectations for a draw of 3.29 million barrels.

In other news, Roblox (NYSE:RBLX) slumped 8% on signs the reopening is denting demand for gaming. The video game platform reported 43 million daily active users for May, up 28% compared to a year earlier but down from 43.3 million in April.

S&P 500 in Red as Fed's Forecast for Sooner Liftoff Sours Sentiment
 

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Comments (23)
Steve Lora
Steve Lora Jun 16, 2021 9:20PM ET
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Trump would have this at 40k by now and <2% inflation
Dilligaf Fagillid
Dilligaf Fagillid Jun 16, 2021 9:14PM ET
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Here I am sitting on the toilet trying to defecate but only farted because inflation scares me. I should continue to accept the minimum wage in 1970 which was $1.60 per hour so inflation can stop. Good luck to me.
Ethan Strong
Ethan Strong Jun 16, 2021 9:12PM ET
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A healthy markets ebbs and flows. One directional movement is not. A pullback is needed.
Joel Schwartz
Joel Schwartz Jun 16, 2021 9:12PM ET
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Whoever downvoted you is jacked on leveraged weekly yolos lol
Sandeep Gupta
Sandeep Gupta Jun 16, 2021 9:12PM ET
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Where do you think money is going to flow to now?
Steffen vdm
Steffen vdm Jun 16, 2021 9:12PM ET
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Sandeep Gupta commodities
Arvind Ganotra
Arvind Ganotra Jun 16, 2021 8:34PM ET
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I am okay with some correction in market. Inflation is scary
Asia Fighter
Asia Fighter Jun 16, 2021 8:34PM ET
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Matt Brackley
Matt Brackley Jun 16, 2021 8:34PM ET
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correction pfft...let's try a multi year bear market
Dilligaf Fagillid
Dilligaf Fagillid Jun 16, 2021 8:34PM ET
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Wimp.
Jeremy Thornton
Jeremy Thornton Jun 16, 2021 8:34PM ET
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Oh please! 🙄
Rob Fordham
Rob Fordham Jun 16, 2021 8:07PM ET
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If the fed had said we are changing nothing the market would have pulled back because of that. Bottom line is the market wanted to pull back here and this was the excuse. It will be ok people
Rob Fordham
Rob Fordham Jun 16, 2021 8:01PM ET
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I will bet market opens down a point or two then end up flat tommorow
Jo Riley
Jo Riley Jun 16, 2021 8:01PM ET
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And you lost that bet...
Edward Lewis
Edward Lewis Jun 16, 2021 7:48PM ET
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Fed was able to raise rates under Trump - until democrats decided to shut down the country in 2020 for political purposes - Biden unfortunately does not have an economic plan that can accommodate rate hikes...socialist practices like massive government spending, hyperinflation, and corrupting elections are going to crumble the economy and turn the U.S. into a third-world dictatorship...fortunately Congress has not been completely taken over by Anti-American democrats and are blocking some of his damage.
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Jo Riley
Jo Riley Jun 16, 2021 7:48PM ET
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The sad Marxist democrat party - everything they touch starts to die.  The true believers of their religion just need to examine their leaders carefully to discover that they don't believe and are just using them.   Examples:  Obama buys beachfront property when supposedly the oceans are going to overflow the land due "climate change" Biden actually is friendly with Putin and helps him with their pipeline, when Russia is supposed to be bad. The BLM leader uses raised funds to buy expensive private homes, etc, etc. And history has endless examples of socialist leaders living in luxury, while still spinning lies for their deceived followers:  Stalin, Mao, Kim Jong Un, Maduro, etc.
Rob Fordham
Rob Fordham Jun 16, 2021 7:48PM ET
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Jo Riley your tinfoil hat is sticking out — may want to tuck that back in
Joel Schwartz
Joel Schwartz Jun 16, 2021 7:48PM ET
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How can I short you directly, Edward…
Samantha Sa
Samantha Sa Jun 16, 2021 7:48PM ET
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Rates were raised four times in 2018 but were then cut three times 2019.
Darryl Allen
Darryl Allen Jun 16, 2021 7:48PM ET
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when you have no rebuttal, just call them a conspiracy theorist.
Chris Sundo
Chris Sundo Jun 16, 2021 7:46PM ET
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' .. sours sentiment ..' -- the sentiment of a ***alright. What do you expect from a ***or its handlers? .. Caveat Emptor ..
Edward Lewis
Edward Lewis Jun 16, 2021 7:46PM ET
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Fed was able to raise rates under Trump - until democrats decided to shut down the country in 2020 for political purposes - Biden unfortunately does not have an economic plan that can accommodate rate hikes...socialist practices like massive government spending, hyperinflation, and corrupting elections are going to crumble the economy and turn the U.S. into a third-world dictatorship...fortunately Congress has not been completely taken over by Anti-American democrats and are blocking some of his damage.
Dave Jones
Dave Jones Jun 16, 2021 7:05PM ET
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everything is awesome?
St Af
St Af Jun 16, 2021 6:57PM ET
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Notice how J. Powell laughs like W. Buffett ? Such A Fake Laugh !
Erwin Jedwab
Erwin Jedwab Jun 16, 2021 6:45PM ET
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3 increases in interest rates will cause downward move, don't forget this
Justin McNaughton
Justin McNaughton Jun 16, 2021 6:45PM ET
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just the idea of rate hikes will cause downward move. tomorrow will be a blood red day.
Rob Fordham
Rob Fordham Jun 16, 2021 6:45PM ET
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Justin McNaughton probably but the market will be overreacting if pulls back meaningfully like 5 percent or so time to buy. This is a vast over reaction
Steve Lora
Steve Lora Jun 16, 2021 6:18PM ET
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Fed caused the first great depression when it allowed banks intrest rates to decrease
Matt Brackley
Matt Brackley Jun 16, 2021 6:18PM ET
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party like it's 1929 bud!
Sean Livingstone
Sean Livingstone Jun 16, 2021 5:56PM ET
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We all know it but I shorted the market by buying puts at the beginning, sold at 419 spy 328 qqq, close them, then buy shares. Nothing is wrong...
Mitchel Pioneer
Mitchel Pioneer Jun 16, 2021 5:36PM ET
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Sour sentiment can't prevent the "late trade" miracle, as the pumps were again pulling losses out of the system, flagrant as ever.  The laughingstock of the financial world can set a closing high, but there's always "buyers" near the close to prevent a closing low.  What a joke.
Jim Divers
Jim Divers Jun 16, 2021 5:12PM ET
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Wall Street Expects The Feb to Support Forever. Geez
Mart Bab
Rubberduck1973 Jun 16, 2021 5:12PM ET
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Start of bear market indeed
petet lurkar
petet lurkar Jun 16, 2021 5:12PM ET
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lol u serious bro? 🤣
Rob Fordham
Rob Fordham Jun 16, 2021 5:12PM ET
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Bear market in an economybthat is on fire and will be for awhile maybe u should have someone handle ur investing for u if u think that
American Truth
American Truth Jun 16, 2021 5:11PM ET
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markets back to all time highs tomorrow.
Richard Tomlin
Richard Tomlin Jun 16, 2021 5:11PM ET
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no it's going be a pullback
Rob Fordham
Rob Fordham Jun 16, 2021 5:11PM ET
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Richard Tomlin maybe this week and next are seasonly bad anyway. But still way up by year end even if it does pullback
Jeremy Thornton
Jeremy Thornton Jun 16, 2021 5:11PM ET
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Richard Tomlin If it was it would have pulled back a lot more today then it did.
Alexander Stinson
Alexander Stinson Jun 16, 2021 5:01PM ET
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bear market
MK MK
MK MK Jun 16, 2021 4:59PM ET
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What the sheeps :)
Mario tragik
Mario tragik Jun 16, 2021 4:56PM ET
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sooner? lmao cant make this up, these crooks want your shares at discount, do not sell it to them.
Jack Ziegler
Jack Ziegler Jun 16, 2021 4:56PM ET
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100 percent correct!
milena villa escobar
milena villa escobar Jun 16, 2021 4:32PM ET
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That will never be able to raise interest rates without collapsing the financial markets and they know that. They have painted themselves into a corner.  For sure they're not going to raise any interest rates before the midterms next year being as politically charged as they are these days in favor of Democrats
Nget Panha
Nget Panha Jun 16, 2021 4:32PM ET
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why
Jeremy Thornton
Jeremy Thornton Jun 16, 2021 4:32PM ET
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Oh please! They did all the damage under the WORST president in US history who was a Republican C Sucker.
Michael Leffler
PeerGroup Jun 16, 2021 4:23PM ET
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A possible adjustment at the very soonest 2023 and at the most 60 basis points?  Yawn.
Kevin Tortoise
Kevin Tortoise Jun 16, 2021 4:23PM ET
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No, this is just the beginning of the Fed's move to acclimate markets to the reality that rates will be going up. In future meetings they will walk that 0.60 number for 2023 up incrementally. They're doing this to avoid another taper tantrum. The FFR is probably going up to 1.10% if not more by 2023.
Katie Belle
Katie Belle Jun 16, 2021 4:23PM ET
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Kevin Tortoise out of all the comments here this is the most insightful and is the mechanic behind the drop
Rob Fordham
Rob Fordham Jun 16, 2021 4:23PM ET
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Katie Belle hardly insightful the fed basicaly did nothing and the market basically didNothing much ado about nothing
 
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