Fed Hikes Rates 25bp as S&P 500 Falls for Third Session
The Federal Reserve raised rates by 25 basis points, marking its first increase in three years. The S&P 500 declined 0.45% to 7,552, extending a three-day losing streak as yields surged.
The Federal Reserve lifted the federal funds target range by 25 basis points to 3.75% and 4.00%. This marks the first rate increase since 2023. The move reversed the cut delivered in December. The decision was unanimous among policymakers. Market indices reported by GN auto markets/indices show broad weakness across US benchmarks.
The S&P 500 closed at 7,552, down 0.45%. The Dow Jones Industrial Average fell 1.21% to 51,462. The Nasdaq Composite dropped 0.01% to 25,978. All major S&P 500 sector groups finished lower. Financials led the decline with a 1.62% drop. Energy fell 2.97% on lower crude prices.
Yields and dollar strength
The US 2-year Treasury yield rose 6 basis points to 4.73%. This is a gain of nearly 40 basis points in two weeks. The 10-year yield held near 5.00%. The US Dollar Index climbed 0.7% to its highest level since late July. Money markets now price a 50% chance of another hike in October. Bond traders had built bearish positions prior to the meeting.
Fed signals future hikes
The dot plot shows 12 of 18 members expect higher rates in 2026. The average projected policy rate is 4.125%. Four members indicated a further 50 basis points of tightening. Only two members judged the current range adequate. Fed Chair Kevin Warsh stated inflation trends have not meaningfully improved. He emphasized the committee’s standard for confidence in disinflation remains unmet.
Global markets react
The Shanghai Composite rose 0.71% to 3,892. The Nikkei 225 gained 0.69% to 63,923. The DAX increased 0.53% to 25,538. Brent crude slipped to 105 US dollars per barrel. WTI crude fell 3.21% to 102.43 US dollars. Gold declined 0.65% to 4,264.21 US dollars. Bitcoin traded near 75,666 US dollars after regulatory hurdles in the US Senate.
