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

Published 06/16/2021, 03:35 PM
Updated 06/16/2021, 04:12 PM
© Reuters.

© 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.

Latest comments

Trump would have this at 40k by now and <2% inflation
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.
A healthy markets ebbs and flows. One directional movement is not. A pullback is needed.
Whoever downvoted you is jacked on leveraged weekly yolos lol
Where do you think money is going to flow to now?
commodities
I am okay with some correction in market. Inflation is scary
correction pfft...let's try a multi year bear market
Wimp.
Oh please! 🙄
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
I will bet market opens down a point or two then end up flat tommorow
And you lost that bet...
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.
your tinfoil hat is sticking out — may want to tuck that back in
How can I short you directly, Edward…
Rates were raised four times in 2018 but were then cut three times 2019.
' .. sours sentiment ..' -- the sentiment of a ***alright. What do you expect from a ***or its handlers? .. Caveat Emptor ..
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.
everything is awesome?
Notice how J. Powell laughs like W. Buffett ? Such A Fake Laugh !
3 increases in interest rates will cause downward move, don't forget this
just the idea of rate hikes will cause downward move. tomorrow will be a blood red day.
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
Fed caused the first great depression when it allowed banks intrest rates to decrease
party like it's 1929 bud!
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.
Wall Street Expects The Feb to Support Forever. Geez
Start of bear market indeed
lol u serious bro? 🤣
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
markets back to all time highs tomorrow.
no it's going be a pullback
maybe this week and next are seasonly bad anyway. But still way up by year end even if it does pullback
If it was it would have pulled back a lot more today then it did.
bear market
sooner? lmao cant make this up, these crooks want your shares at discount, do not sell it to them.
100 percent correct!
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
why
Oh please! They did all the damage under the WORST president in US history who was a Republican C Sucker.
A possible adjustment at the very soonest 2023 and at the most 60 basis points?  Yawn.
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.
out of all the comments here this is the most insightful and is the mechanic behind the drop
hardly insightful the fed basicaly did nothing and the market basically didNothing much ado about nothing
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