US stocks drop despite interest rate freeze
The Federal Reserve’s long-awaited pause in interest rate hikes sent stocks modestly lower today as Wall Street welcomed the move but worried that more increases might still be ahead.
The Fed had implemented 17 quarter-percentage point rate hikes since June 2004, raising the nation’s benchmark rate from 1% to 5.25%, where it stood after today’s meeting.
The Fed said economic growth was slowing, but that some inflation risks remain - meaning Fed officials could resume raising rates at subsequent meetings, the next one coming next month.
However, with many on Wall Street concerned that the Fed could raise rates too far, possibly pushing the economy into a recession, the pause was welcomed even as uncertainty about future rate hikes weighed on stocks.
“We had been anticipating this pause for weeks now, and the accepted wisdom was that whatever they did was going to be anticlimactic for the market,” said John Wilson, managing director of equity capital markets at Morgan Keegan.
“This may be a little bit of selling on the news, sure, but I couldn’t have asked for a better outcome from the Fed.
The Dow Jones industrial average fell 45.79, or 0.41%, to 11,173.59 after fluctuating shortly after the Fed’s announcement.
Broader stock indicators also fell. The Standard & Poor’s 500 index lost 4.29, or 0.34%, to 1,271.48, and the Nasdaq composite index dropped 11.65, or 0.56%, to 2,060.85.
