Wall Street closed sharply lower Wednesday after the Federal Reserve stepped up its fight against inflation by raising interest rates. The S&P 500 fell 66 points, or 1.7%, to 3,789.93. The Dow Jones Industrial Average fell 522.45 points, or 1.7%, to 30,183.78. The Nasdaq fell 204.86 points, or 1.8%, to 11,220.19. The Fed’s fifth rate hike of the year came in as expected, three-quarters of a percentage point, but the central bank also raised its forecasts for how high interest rates will ultimately have to go. The Fed is raising rates to fight the worst inflation in 40 years. The worry is that it may cause a recession by hitting the brakes too hard on the economy.
The central bank's latest rate hike lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level in 14 years, and up from zero at the start of the year. Bond yields snapped higher Wednesday. "The markets are dancing to the Fed Funds Waltz, with the bond market leading the stock market,” said Sam Stovall, chief investment strategist at CFRA.
Gasoline prices, which helped fuel inflation for months, have been generally falling. But, the average price for a gallon of gas went up for the first time in more than three months, rising to $3.681 from $3.674, according to motor club AAA. Several companies gained ground after giving investors encouraging financial updates, the AP reports. Cheerios maker General Mills rose 5.8% after raising its profit forecast for the year. CoverGirl owner Coty rose 3.2% following a solid revenue growth update, and Walmart rose 0.9% after saying it will hire 40,000 US workers for the holidays, a majority of them seasonal workers. Cruise line operators slipped as Hurricane Fiona continued to batter the Caribbean. Carnival fell 6.8%.
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