Market Update: U.S. Stocks Fall After Fed Decision; XRP Back in the Driver’s Seat

U.S. stocks pivoted sharply lower Wednesday after the Federal Reserve raised rates for an eighth time since late 2015 and signaled its intent to tighten policy further by year’s end. Cryptocurrencies pivoted sharply higher on the strength of XRP, which rose more than 17% on major exchanges.

Stock-Rally Fizzles

Stocks were generally higher for most of the day before reversing course in the final hour. The large-cap S&P 500 Index fell 0.3% to 2,905.97, with seven of 11 primary sectors finishing in the red. The newly created communications services sector was the best performer, rising 0.3%. On the opposite side of the ledger, financials and materials each fell 1% or more.

The Dow Jones Industrial Average declined 106.93 points, or 0.4%, to close at 26,385.28. The technology-laden Nasdaq Composite Index closed down 0.2% at 7,990.37.

Fed Raises Rates

The Federal Reserve raised rates by 25 basis points on Wednesday following its two-day policy meeting in Washington. While the Fed hinted at a fourth rate hike this year, officials dropped language saying that the “stance of monetary policy remains accommodative.” For some observers, this means the Fed no longer believes its policies are accommodative, which may translate into slower upward adjustments in the future.

Federal Reserve Chairman Jerome Powell attempted to quell that speculation in a press conference shortly after the meeting.

“The change does not signal any change in the likely path of policy,” Powell said. “Instead it is a sign that policy is proceeding in line with our expectations.”

U.S. Treasury yields were down across the board after Powell gave a more subdued outlook on inflation. Previously, the central bank was believed to be accelerating interest rate hikes to account for hotter than expected price growth.

XRP, BCH Boost Cryptoassets

The digital asset class recovered more than $10 billion in lost market cap on Wednesday, as XRP resumed its bullish breakout and bitcoin stabilized above a key technical threshold.

XRP surged 17.8% to $0.531, picking up where it left off last week. The so-called banker’s cryptocurrency has been riding high on expectations that Ripple Labs will soon unveil a new product centered on the xRapid liquidity platform.

Bitcoin cash also joined in on the rally, with prices soaring 18.9% to $511. Earlier this week, Hacked confirmed that the notorious Tokyo Whale offloaded some $230 million worth of BTC and BCH in the second quarter, moves that likely contributed to the market’s sharp and sudden reversal.

Bitcoin, the largest cryptocurrency by market cap, rose 2% to $6,525. All said, the cryptocurrency market was valued at $216.2 billion.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi