Fed signals rate hikes soon | Dow closes lower after wild trading

Fed signals rate hikes soon | Dow closes lower after wild trading | Balance sheet reductions ahead?

WED, JAN 26, 2022

EVENING BRIEF

AS OF WED, JAN 26, 2022 • 05:04 ET

DJIA		34168.09
		-0.38%	-129.64

S&P 500		4349.93
		-0.15%	-6.52

NASDAQ		13542.12
		+0.02%	+2.82

Most Active

DOW
NAME	LAST	CHG	%CHG
AAPL	159.69	-0.09	-0.06%
MSFT	296.71	+8.22	+2.85%
INTC	51.69	+0.69	+1.35%

S&P 500
NAME	LAST	CHG	%CHG
T	24.25	-2.23	-8.42%
F	19.91	-0.07	-0.35%
AAPL	159.69	-0.09	-0.06%

NASDAQ
NAME	LAST	CHG	%CHG
AAPL	159.69	-0.09	-0.06%
AMD	110.71	-0.42	-0.38%
MSFT	296.71	+8.22	+2.85%

EDITOR'S NOTE

U.S. stocks on Wednesday saw a third straight session of wild trading as the Federal Reserve gave an update on its plans to raise interest rates to address inflation.

The Dow Jones Industrial Average and the S&P 500 both finished the session lower after trading well into positive territory for most of the day, while the Nasdaq Composite eased off its highs to close little changed.

Stocks initially rose following the Fed's post-policy meeting announcement that the central bank was ready to increase its benchmark short-term borrowing rate by a quarter-percentage-point soon, which market participants expected.

The central bank also signaled in a separate statement that it would begin shrinking its balance sheet after hiking rates.

However, Fed Chair Jerome Powell in a subsequent press conference said there was "quite a bit of room" to raise interest rates without affecting the labor market. He added that prices could keep running higher as "inflation risks are still to the upside."

The benchmark 10-year Treasury yield surged above 1.8% following the Fed announcements and Powell's comments. Stocks then rolled over from their highs.

"The stock market is especially vulnerable to higher rates and the removal of the tailwind that the Fed's asset purchases have provided for the past two years," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "We are concerned that the volatility we have already witnessed this month will increase in the months ahead."