S&P 500 in Red as Fed’s Forecast for Sooner Liftoff Sours Sentiment By Investing.com

By Yasin Ebrahim

Investing.com – The S&P 500 ended in the red Wednesday after the Federal Reserve penciled in two interest rates hikes by the end of 2023 amid expectations for stronger growth and inflation.     

The S&P 500 fell 0.53%, and the Dow Jones Industrial Average was down 0.77%, or 265 points, and the Nasdaq Composite was down 0.24%.

The Federal Reserve kept interest rates and monthly bond buying steady, though it signaled that it could hike rates sooner than previously expected.

The Fed hiked its interest-rate outlook in 2023 to 0.6% from previous projections of 0.1% in March, signaling two 0.25% rate hikes, the Fed’s Summary of Economic Projections showed. The move suggests the central bank is starting to take the pace of inflation more seriously. 

“[A] majority of meeting participants now expect higher key rates as early as 2023, suggesting that the Fed is accelerating its policy normalization timetable under the impression of rising price risks,” Commerzbank (DE:CBKG) said.

In the press conference that followed, however, Fed Chairman Jerome Powell attempted to downplay the hawkish outlook on rates.

“The projections are individual projections and not a committee forecast … they’re not a plan,” Powell said. “Discussing liftoff now would be highly premature.”

Treasury yields jumped sharply on the news as investors sold bonds on expectations of rising rates. 

Growth sectors of the market like tech, which typically boasts higher valuation that are unattractive in a rising rate environment, pared some of their post-Fed losses, but ultimately ended lower.     

Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL),  Amazon.com (NASDAQ:AMZN) and Facebook (NASDAQ:FB) ended the day mixed. 

Oracle (NYSE:ORCL), meanwhile, fell 6% after its softer second-quarter guidance offset first-quarter results that beat on both the top and bottom lines.

Cyclicals, which tend to move in tandem with an improving economy, were also lower, though financials were higher as bank stocks were boosted by rising rates.  

Energy stocks were lower as oil prices pared some of their recent gains, though remained close to October 2018 highs, as weekly U.S. crude stockpiles fell more than expected.

Crude oil inventories fell 7.355 million barrels last week, compared with analysts’ expectations for a draw of 3.29 million barrels.

In other news, Roblox (NYSE:RBLX) slumped 8% on signs the reopening is denting demand for gaming. The video game platform reported 43 million daily active users for May, up 28% compared to a year earlier but down from 43.3 million in April.