DJIA: 34,168.09, down 129.64
S&P 500: 4,349.93, down 6.52
Nasdaq: 13,542.12, up 2.83

Stocks lower after Fed; yields jump

U.S. stocks finished mostly lower in volatile trading Wednesday as investors digested the Federal Reserve’s (Fed) policy decision. As expected, committee members set the stage for an interest rate hike in March as the central bank shifts its priority to combating elevated inflation. Fed officials also generally laid the groundwork for “significantly reducing” its nearly $9 trillion balance sheet sometime after liftoff, pivoting away from ultra-loose monetary policy implemented during the pandemic. Following the decision, Fed Chair Jerome Powell’s remarks were construed as hawkish, as he characterized inflation as “slightly worse” than in December and declined to rule out a rate increase at every meeting. The Dow lost 129 points, erasing a more than 500-point early session gain. The S&P 500 slipped 0.2%, wiping out a morning advance of over 2%. The Nasdaq Composite closed little changed.

Treasuries slumped, with the yield on the 10-year note up nine basis points (0.09%) to 1.87%, while the more Fed-sensitive two-year note yield spiked 13 basis points (0.13%) to 1.16%-a 23-month peak. In FOREX trading, a gauge of the U.S. dollar rallied 0.6%. On the data front, new home sales jumped 11.9% to a nine-month high in December.

Nine of 11 S&P 500 sectors ended in negative territory, with bond proxy Real Estate leading decliners. Technology shares bucked the downtrend on solid earnings. Microsoft Corp. added 2.9% after the Tech titan topped analyst profit and revenue estimates and offered a positive current-quarter outlook amid strength in its cloud services segment. Corning Inc. surged 11.2% as the materials science company delivered upbeat growth forecasts.

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