US stocks fell sharply on Wednesday after minutes of a US Federal Reserve meeting indicated the central bank may have to raise interest rates sooner than expected.
The S&P 500 and Nasdaq sharply extended their declines minutes later, which investors saw more bullish than feared. The Dow, which reached a record high at the start of the day, reversed course and closed at a lower level.
Minutes of the Fed’s December 14-15 policy meeting gave more details about the central bank’s shift towards a tighter monetary policy last month to curb inflation. Policymakers said last month that the US labor market was “too tight”.
“It’s more fluctuating than expected. This fresh move could be problematic for both the stock and bond markets,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
The S&P 500 technology sector was the biggest pressure on the S&P 500, while the rate-sensitive real estate sector led the decline across sectors.
According to preliminary data, the S&P 500 closed 92.86 points, or 1.94%, down at 4,700.49, while the Nasdaq Composite was down 524.89 points, or 3.36%, at 15,097.83. The Dow Jones Industrial Average fell 387.47 points, or 1.05%, to end at 36,412.18.
Rising interest rates increase the cost of borrowing for businesses and consumers. Higher rates can lower stock multiples, especially for technology and other growth stocks.
The S&P 500 financial index also declined a day after recording an all-time high.
Policymakers had agreed to end their pandemic-era program of bond purchases, and issued forecasts projecting three quarter-percentage-point rate increases through 2022.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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