US close: Stocks drop on Fed's 'higher-for-longer' strategy
Stocks on Wall Street finished Wednesday's session in the red after Federal Reserve policymakers revealed that an interest-rate hike was probable at one of its next two meetings.
The news came at the conclusion of the two-day Federal Open Market Committee meeting, where the central bank chose to leave interest rates unchanged from the 5.25-5.5% range, as was widely expected by the market. This was the second time this year where its rate-hiking cycle has been paused.
However, 12 of the 19 voting FOMC members said they expect to raise rates once more this year, at one of the two remaining meetings in November or December.
Furthermore, looking further forward, the committee indicated that interest rates would only be lowered to around 5% by the end of 2024, indicating that they remain committed to a "higher for longer" strategy.
At a press conference following the meeting, chair Jerome Powell said he still needed to see "convincing evidence" that higher interest rates are having the desired effect on inflation before the FOMC can begin to loosen monetary policy.
The comments pushed stocks lower just before the closing bell, following a broadly positive start. The Dow Jones Industrial Average was down 0.2% by the close at 34,441, the S&P 500 declined 0.9% to 4,402, while the Nasdaq dropped 1.5% to 13,469.
The only major economic data release on Wednesday was weekly US mortgage applications, which jumped 5.4% in the seven days to 15 September, after a 0.8% decline the previous week. The rebound came despite mortgage rates increasing to a one-month high.
Instacart reverses after solid debut
Instacart, the grocery delivery business that debuted on the Nasdaq on Tuesday, dropped 11% to $30.10, almost entirely wiping out the 12% jump following its IPO. The flotation was priced at $30.
Coty was trading 4% higher after the cosmetics manufacturer delivered "outstanding FY23 results" with like-for-like revenues growing 12%. The company said the core business would grow at the top end of the forecast range this year.
General Mills was flat despite the food manufacturing beating forecasts with its fiscal first-quarter results. The company kept its full-year guidance unchanged but said the current environment is being characterised by "a resilient but increasingly cautious consumer".
Image-sharing platform Pinterest was in demand, rising 3% after Citigroup upgraded the stock from 'neutral' to 'buy' and raised its target price from $31 to $36 following a recent investor event.