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US Stocks Sink Wednesday 06/17 15:02
The U.S. stock market sank Wednesday after nearly half the policymakers at
the Federal Reserve indicated they may want to raise interest rates before the
end of the year.
NEW YORK (AP) -- The U.S. stock market sank Wednesday after nearly half the
policymakers at the Federal Reserve indicated they may want to raise interest
rates before the end of the year. Higher rates can keep a lid on inflation, but
they also slow the economy and hurt prices for investments.
The S&P 500 slumped 1.1% and erased an earlier, modest gain after the Fed
released projections showing nine of 18 policymakers see the central bank
raising its main interest rate at least once this year. The Dow Jones
Industrial Average went from a gain of 281 points in the morning to a drop of
438 points, or 0.8%, as of 3:30 p.m. Eastern time, and the Nasdaq composite
sank 1%.
One important policymaker at the Fed did not give a forecast for where the
federal funds rate may end 2026 and the next couple years: Chairman Kevin
Warsh. In his first press conference as head of the U.S. central bank, Warsh
said he's also considering a revamp of how the Fed communicates with the market
and U.S. households and businesses.
That includes the end of dropping hints in Fed statements about where
interest rates may be heading in the future, something called "forward
guidance."
Warsh said he wants Wall Street to react to incoming data about inflation,
the job market and other economic data based on how they affect prices for
stocks, bonds and other investments rather than how it expects the Federal
Reserve to react to them.
As part of that, Warsh said the Fed could make changes in its usual release
of projections every three months showing where Fed officials suspect interest
rates, the economy and inflation are heading in upcoming years.
For now, though, Wall Street reacted uneasily to Fed officials' latest set
of projections. Stocks zigzagged up and down several times following the
release. The Fed also decided to keep the federal funds rate steady at this
meeting, as it has all year so far.
In the bond market, Treasury yields climbed. The yield on the 10-year
Treasury, which influences rates for mortgages and other loans going to U.S.
households and businesses, rose to 4.48% from 4.43% late Tuesday. The two-year
Treasury yield, which more closely tracks expectations for Fed action, jumped
more. It climbed to 4.20% from 4.05%.
High yields in bond markets worldwide caused by worries about inflation have
been threatening to slow economies and undercut prices for all kinds of
investments.
In the stock market, SpaceX erased an early gain and dropped 3.3%. It's
potentially on track for its first loss since its ballyhooed debut on the U.S.
stock market last week.
That helped overshadow a jump of 15.2% for La-Z-Boy, which reported stronger
profit and revenue for the latest quarter than analysts expected. It benefited
from revenue made at newly opened stores, though Chief Financial Officer Taylor
Luebke said the company continues to have "a measured view" of the broad sales
environment.
A report released Wednesday said retailers across the country saw their
revenue grow at a faster pace in May than economists expected, offering hope
that solid spending by consumers can support the economy. But high inflation
has also made U.S. shoppers feel more discouraged about their finances.
Iran is set to immediately take steps to reopen the Strait of Hormuz once
the deal is signed, and that would allow oil tankers to exit the Persian Gulf
once again and deliver crude to customers worldwide. The hope is that will take
pressure off inflation.
Oil prices were steadier Wednesday following sharp slides earlier in the
week on optimism about the tentative U.S.-Iran deal to get the global flow of
oil going again. The price for a barrel of Brent crude oil rose 0.7% to $79.55.
It's still above its roughly $70 price from before the war, but it's well below
its $100-plus price from a few weeks ago.
Iran is set to immediately take steps to reopen the Strait of Hormuz once
the deal is signed, and that would allow oil tankers to exit the Persian Gulf
once again and deliver crude to customers worldwide. The hope is that will take
pressure off inflation.
In stock markets abroad, indexes were mixed across Europe and Asia.
London's FTSE 100 added 0.1% after a report showed U.K. inflation remained
at 2.8% in May.
South Korea's Kospi jumped 1.6%, and Hong Kong's Hang Seng fell 0.7% for two
of the world's bigger moves.
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