Nasdaq 100, Dow Jones, S&P 500: Stocks Sink after Powell Fails to Deliver Dovish Message

S&P 500 Index Highlights

• Fed drops language about future rate increases
• Powell’s comment suggests Fed is not likely to cut rates
• S&P 500 turns lower during Powell’s press conference

S&P 500 Index Overview

The major US stock indexes are lower late Wednesday after the Federal Reserve raised rates by 25 basis points. The move was widely expected. The central bank also signaled it could pause rate hikes through a change in its statement.

The indexes were edging higher shortly after the release of the headline interest decision and monetary policy statement, but began to pullback shortly after Reserve Bank Chairman Jerome Powell began his press conference.

During the press conference, the selling continued as Powell didn’t mention the possibility of a rate cut before the year-end, which investors were hoping for.

At 19:30 GMT, the blue chip Dow Jones Industrial Average is at 33451.82, down 232.71 or 0.69%. The benchmark S&P 500 Index is at 4096.75, down 22.83 or -0.55% and the tech-weighted NASDAQ 100 is trading 12043.08, down 37.42 or -0.31%.

Federal Reserve Considers Additional Policy

“In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said in a statement.

Traders React to Fed’s Silence

However, traders were focusing on what the Fed didn’t say this time in its post-meeting statement. The central bank has altered its stance on future rate increases, indicating a shift in policy. They omitted the line from the previous statement that suggested further tightening might be necessary.

Powell Sees ‘Meaningful Change’ Ahead

Powell commented to the press after the statement’s release that dropping that language was a “meaningful change” and that the central bank’s June decision would be driven by incoming data.

Analysts Predict End of Rate Hikes

Some analysts believe that Wednesday’s rate increase will likely be the last one in this cycle.

The Fed is concerned that tighter credit conditions will weigh on economic activity and hiring, while helping maintain disinflation trend. Credit tightening is about to cripple the economy. And it appears that as long as we don’t get a perfect storm of hotter-than-expected labor and inflation data, the Fed will keep rates on hold for at the very least till the end of the year.

Powell’s Press Conference Disappoints Investors, Stocks Fall

During his press conference, Powell failed to deliver the dovish tone that investors were anticipating. Instead, investors focused on Powell’s comment about the rate-setting committee’s view on inflation, which is expected to decline slowly. Powell noted that it would not be appropriate to cut rates if this forecast is correct, which further dampened market sentiment. As a result, the major averages turned lower.