US close: Wall Street slips after Fed surprise
Wall Street retreated after US rate setters flagged the possibility for more interest rate hikes in 2017 than they had done so previously, with government bond markets in particular feeling the pinch.
The Dow Jones Industrial Average fell 0.60% or 1118.68 points to 19,792.53, the S&P 500 lost 0.81% or 18.44 points to end at 2,253.28, and the Nasdaq retreated 0.50% or 27.16 points to close at 5,436.68.
The Federeral Open Market Committee hiked the target range for the Fed funds rate by 25 basis points, to between 0.50% and 0.75%, as expected.
However, the interest rate projections submitted by the members of the Fed board and the regional Fed presidents revealed that policymakers now expected at least three more quarter-point interest rate hikes next year, up from the two they envisaged in September, when they last submitted projections.
That saw the yield on the benchmark 10-year US Treasury note jump 10 basis points to 2.57%, its highest level since May 2014.
"We have been calling for a faster normalization of the monetary policy stance for some time now. But the Fed had always preferred to err on the side of caution and found reasons for delaying the next rate hike over and over again. Against this backdrop, we see the upgrade of the dots as a step in the right direction, but doubt that this signals any change in the policy outlook. Because while the median dot has moved up by 25bp, there are still six FOMC members (out of 17), who continue to see only two hikes (or less) in 2017, followed by another three in 2018.
"[...] We thus stick to our forecast of two hikes in 2017, followed by three hikes in 2018. The uncertainty surrounding this outlook is obviously extremely high at this juncture. But this primarily reflects the size and timing of the incoming administration’s fiscal stimulus, rather than today’s upward shift in the dots," said Dr. Harm Bandholz, chief US economist at UniCredit Research.
Meanwhile, oil prices retreated after the American Petroleum Institute said late on Tuesday that in the week ended 9 December, there was a 4.68m barrel build in US crude inventory levels, versus a 1.5m draw expected.
West Texas Intermediate dropped by $1.41 per barrel to $51.04 while gold futures on Comex skidded 2.11% lower to end at 1,139.20 per troy ounce.
On the data front, US retail sales climbed just 0.1% last month, falling short of forecasts for a 0.3% increase. October’s figures were also revised down to 0.6% growth from a previously reported 0.8% rise.
US industrial production, which measures factory, mine and utility outputs, fell 0.4% in November, compared to a 0.1% increase in October and more than the 0.3% drop forecast.
Capacity use declined to 75% from 75.4% a month earlier and slightly less than the 75.1% expected.
US business inventories slid 0.2% in October following a 0.1% rise in September and worse than the 0.1% decline that was estimated.
In corporate news, shares in car rental company Hertz dropped 0.9% after saying late on Tuesday that chief executive John Tague will retire, to be succeeded by Kathryn Marinello.
Johnson & Johnson nudged higher 0.85% after the pharmaceutical giant said it ended discussions with Swiss biotech firm Actelion regarding a potential transaction.
Dow Jones - Risers
Goldman Sachs Group Inc. (GS) $239.93 0.58%
American Express Co. (AXP) $74.07 0.31%
Walt Disney Co. (DIS) $104.05 0.19%
International Business Machines Corp. (IBM) $168.51 0.13%
McDonald's Corp. (MCD) $122.84 0.13%
Merck & Co. Inc. (MRK) $61.80 0.02%
Apple Inc. (AAPL) $115.19 -0.00%
Pfizer Inc. (PFE) $32.82 -0.03%
JP Morgan Chase & Co. (JPM) $84.73 -0.04%
Visa Inc. (V) $79.13 -0.09%
Dow Jones - Fallers
Caterpillar Inc. (CAT) $93.74 -2.37%
Exxon Mobil Corp. (XOM) $90.58 -2.16%
Boeing Co. (BA) $154.47 -1.40%
Verizon Communications Inc. (VZ) $51.63 -1.39%
E.I. du Pont de Nemours and Co. (DD) $73.71 -1.39%
Coca-Cola Co. (KO) $41.21 -1.32%
3M Co. (MMM) $176.60 -1.25%
Chevron Corp. (CVX) $115.96 -1.24%
Nike Inc. (NKE) $51.79 -0.98%
Procter & Gamble Co. (PG) $84.37 -0.95%
S&P 500 - Risers
Nvidia Corp. (NVDA) $96.45 5.79%
Twenty-First Century Fox Inc Class A (FOXA) $28.02 3.62%
Alexion Pharmaceuticals Inc. (ALXN) $113.52 3.19%
Akamai Technologies Inc. (AKAM) $66.99 2.84%
Twenty-First Century Fox Inc Class B (FOX) $27.59 2.57%
Bristol-Myers Squibb (BMY) $58.50 2.33%
Vertex Pharmaceuticals Inc. (VRTX) $78.33 2.26%
Progressive Corp. (PGR) $35.09 1.98%
United States Steel Corp. (X) $35.53 1.54%
SunTrust Banks Inc. (STI) $55.13 1.25%
S&P 500 - Fallers
Universal Health Services Inc. (UHS) $101.55 -6.83%
Newmont Mining Corp. (NEM) $31.68 -6.47%
Transocean Ltd. (RIG) $14.58 -5.02%
Diamond Offshore Drilling Inc. (DO) $19.40 -4.81%
HCP Inc. (HCP) $29.01 -4.54%
Murphy Oil Corp. (MUR) $32.80 -4.37%
Tenet Healthcare Corp. (THC) $14.38 -4.32%
GameStop Corp. (GME) $25.28 -4.21%
Newfield Exploration Co (NFX) $45.88 -4.18%
Range Resources Corp. (RRC) $34.85 -3.97%