Dow Plunges 141 Points as Federal Reserve Signals No More Rate Hikes This Year
The Dow and broader U.S. stock market traded lower Wednesday after the Federal Reserve held the line on interest rates and indicated there would be no additional hikes coming this year. President Trump spooked markets when he said that his administration was considering leaving tariffs on Chinese goods for a “substantial period.”
Dow and S&P 500 Decline
The Dow Jones Industrial Average swung into positive territory Wednesday afternoon before losing momentum toward the close. The benchmark index settled down 141.85 points, or 0.6%, at 25,745.53. Boeing Co (BA), the Dow’s biggest problem child of late, reported gains of 0.6%.
The broad S&P 500 Index of large-cap stocks declined 0.3% to close at 2,824.23. Six of 11 primary sectors finished lower, with financials plunging 2.1%. On the opposite side of the ledger, energy and communication services each rose by at least 0.9%.
A strong performance in communication services propelled the Nasdaq Composite Index to minor gains of 0.1% where it settled at 7,728.97.
Fed Changes Guidance
The Federal Open Market Committee (FOMC) concluded its two-day policy meeting on Wednesday by leaving its benchmark interest rate unchanged, a move that was widely anticipated by markets. Fed officials also removed any expectations of additional rate hikes this year and lowered their economic forecasts. The revised outlook was communicated via the quarterly projection materials that accompanied by the main press release.
Central bankers have been forced to adopt a “patient” approach to monetary policy after carnage in the stock markets roiled investor confidence. The major U.S. stock indexes entered bear-market territory in the fourth quarter in a synchronized collapse that reached its pinnacle just before Christmas. A sharp slowdown in global economic growth has also compelled the Fed to change course after hiking interest rates four times in 2018.
The Fed now see the economy growing just 2.1% this year, down from the 2.3% estimate in December. Inflation is likely to reach 1.8% in 2019, down from a previous forecast of 1.9%.
U.S.-China Trade Tensions on the Rise
Stock markets were under pressure Wednesday after President Trump said he was considering holding tariffs on Chinese imports for a “substantial period,” placing further pressure on Beijing ahead of a planned trade summit next week.
“We’re not talking about removing them, we’re talking about leaving them for a substantial period of time because we have to make sure that if we do the deal with China that China lives by the deal,” Trump said, according to BBC.
As Hacked reported Tuesday, China appears to be reneging on some of its concessions because it lacks assurances that the Trump administration will remove tariffs. Trump is sending his top brass to Beijing next week to resume negotiations. A Chinese delegation is expected to fly to Washington, D.C. the following week.
Based on the current negotiating window, both sides are hoping to get a deal in place by the end of April.
Featured image courtesy of Shutterstock. Chart via Stockcharts.com.