U.S. Stocks Plummet After Fed Raises Interest Rates; Crypto Rally Intensifies

U.S. stocks declined sharply on Wednesday, giving up solid gains earlier in the session after the Federal Reserve raised interest rates as expected but failed to quell speculation that tighter monetary policy will undermine economic growth. Meanwhile, bargain hunters in the cryptocurrency market kept their foot on the pedal, sending bitcoin to multi-week highs.

Read more about today’s major developments: Crypto Markets Have Recovered $26 Billion Since Saturday.

Stocks Falter

Appetite for risk declined sharply in late-afternoon trading, as the major stock indexes gave up their gains. The Dow Jones Industrial Average fell 351.58 points, or 1.5%, to close at 23,323.66, its lowest of the year. The blue-chip index was up nearly 400 points earlier in the day.

The broad S&P 500 Index plunged 1.5% to settle at 2,506.95, its lowest since September 2017. All sectors finished lower in negative territory, with consumer discretionary and information technology shares posting the biggest losses.

The technology-focused Nasdaq Composite Index declined 2.2% to 6,636.83. The index, like its counterparts, is on track for yearly lows.

Fed Gives Vote of Confidence

Members of the Federal Open Market Committee (FOMC) voted to raise interest rates on Wednesday for the fourth time this year, signaling continued confidence in the economy. The target for the federal funds rate was raised by a quarter point to 2.50%, as expected.

Despite moving as expected, Fed officials tempered their expectations for hikes next year to two from three. According to Bloomberg, markets were expecting the dot-plot summary of interest rate expectations to show just one upward adjustment in 2019. This reflects underlying angst over economic growth stemming from a string of disappointing data releases, trade uncertainty and a slowdown in the global economy.

In economic data, U.S. existing home sales rose unexpectedly last month, offering some optimism that the housing downturn may be coming to an end. Sales of previously-owned homes rose 1.9% in November to a seasonally adjusted 5.32 million-unit pace, the National Association of Realtors (NAR) reported Wednesday. Analysts had expected a decline of 0.6%.

Crypto Resurgence?

The worst of the crypto market downtrend may be coming to an end following a two-day rally that has added nearly $20 billion to the value of digital assets. Major cryptocurrencies from XRP to Ethereum staged large rallies on Wednesday, as trade volumes more than doubled from their weekend lows.

Bitcoin cash emerged as the biggest gainer, as prices surged 34% to $134.24. In doing so, BCH reasserts itself as the fourth-largest cryptocurrency by market cap, overtaking EOS, Stellar and Tether.

The cryptocurrency market set fresh 16-month lows on Saturday, as bitcoin tested $3,100. The leading digital currency rose 6.4% on Wednesday to $3,785.97. It recorded daily trade volumes of nearly $7 billion, according to CoinMarketCap.

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 Hacked.com and Contributor to CCN.com, 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