Stocks gave up a big rally and took a dive Wednesday after the Federal Reserve raised interest rates again and said it plans to keep raising them next year. The market finished at its lowest level since September 2017.
The U.S. central bank said it expects to increase interest rates at a slightly slower pace next year, and it said it isn't planning any changes in the gradual shrinking of its large bond portfolio. Investors appeared to have hoped the Fed would unveil a sharper slowdown in interest rate hikes and other credit-tightening policies because economic growth is likely to slow down.
Bond prices rose after the Fed’s announcement, sending yields down sharply.
The yield on the 10-year Treasury note fell to 2.78% from 2.84% immediately before the announcement and from 2.82% late Tuesday — a substantial move. Bond yields are benchmarks for mortgages and many other kinds of long-term loans.
The Dow Jones industrial average ended with a loss of 351 points and was down 513 points at its lowest point. Before the Fed's announcement, it was up 381 points.
The stock market’s yo-yo movements were a result of traders trying to parse Fed chief Jerome H. Powell's comments, which essentially were: The economy is strong enough to warrant a rate increase now, but not so strong as to need three increases, as the Fed had indicated a few months ago.
Powell “was threading the needle,” said Frances Donald, head of macroeconomic strategy at Manulife Asset Management. “He had to say that the economic picture is not as good as three months ago, while also saying that the pillars of the economy remain intact.”
Internet, technology and consumer-focused companies dropped.
Facebook fell sharply after the New York Times reported that the social media giant gave companies more access to users' personal data than it has previously said. The report said Facebook had arrangements with more than 150 companies including Microsoft, Amazon, Spotify and Netflix that let different companies read, write and delete users' private messages, see the names of users' friends or their news feeds without their consent.
Separately, the District of Columbia sued Facebook for letting Cambridge Analytica, a data-mining firm that worked for the Trump campaign, improperly access data from as many as 87 million Facebook users.
Facebook sank 7.2% to $133.25. It's down 39% since late July on concerns about a slowdown in user growth and multiple privacy and safety scandals, as well as the possibility of increased regulation in the future.
FedEx dived after saying international shipping, especially in Europe, fell in the latest quarter. FedEx also said that the U.S.-China trade war was affecting its business. The shipping company posted a smaller profit than analysts expected and said it would cut spending and offer buyouts to some workers to help make up for the shaky results.
FedEx stock declined 12.2% to $162.51. It has dropped 35% this year. Its rival UPS fell 3% to $94.32 and has slumped 21% in 2018.
The Dow fell 1.5% to 23,323.66. The Standard & Poor’s 500 index skidded 39.20 points, or 1.5%, to 2,506.96. It has tumbled 14.5% in the last three months, including a loss of 9.2% so far in December.
The tech-heavy Nasdaq composite sank 147.08 points, or 2.2%, to 6,636.83. The Russell 2000 index, which has suffered broader declines than the rest of the market, slid 27.95 points, or 2%, to 1,349.23.
Despite the losses, David Kelly, chief global strategist for JPMorgan Funds, said the market will ultimately react to the health of the economy. He said the Fed's moves Wednesday made sense and could prolong the already long-lasting growth in the United States.
“The Fed behaving in a very prudent, balanced way increases the possibility of a very balanced expansion” continuing, he said.
In after-hours trading, specialty materials company Celanese jumped 6% on the news that it will be added to the S&P 500 on Dec. 24. It will take the place of Express Scripts, which is being acquired by Cigna.
Oil prices rose. They plunged a day earlier on worries about rising supplies and weakening global growth, which could weigh on demand.
Benchmark U.S. crude climbed 2.1% to $47.20 a barrel in New York. It dropped 7% on Tuesday to a 16-month low and has fallen almost 40% since Oct. 3. Brent crude, used to price international oils, rose 1.7% to $57.24 a barrel in London.
Wholesale gasoline rose 2.7% to $1.39 a gallon. Heating oil rose 2.9% to $1.81 a gallon. Natural gas fell 2.9% to $3.73 per 1,000 cubic feet.
Energy company stocks fell again. They're trading at their lowest levels since early 2016.
The dollar was down for the day, though it recovered slightly after the Fed's move. The dollar slipped to 112.36 yen from 112.53 yen. The euro rose to $1.1368 from $1.1357. The British pound fell to $1.2621 from $1.2639.
Gold rose 0.2% to $1,256.40 an ounce. Silver rose 0.8% to $14.82 an ounce. Copper climbed 1.9% to $2.72 a pound.