Fed Rate Hike: US Stocks Go Up, Stocks Come Down – Barron's

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U.S. stock indices initially rose, but then gave up those gains after the Federal Reserve raised its key interest rate by a quarter of a percentage point and unveiled plans to begin shrinking its balance sheet starting this year.


The Dow Jones Industrial Average fell five points, or 0.02% to 21,320, paring back earlier gains that lifted the benchmark more than 40 points. But the S&P 500 dropped 0.3%, and the Nasdaq composite lost 0.5%, or 32.5 points.

The rate hike was as expected, with policy makers voting to raise interest rates to a range of 1% to 1.25%, despite weaker inflation and some signs of economic softening. The central bank still sees the economy reaching its 2% inflation goal.

The Fed still eyes one more rate hike this year, highlighting a rosier job market.

The yield on the 10-year Treasury ticked higher following the announcement, rising to 2.133% from 2.10% earlier today data showed a negative turn for consumer price inflation and retails sales. Bond prices fall as yield rise.

Shares of the iShares 20+ Year Treasury Bond ETF (TLT) inched 1.6% higher to $126.32 a share.

Elsewhere in the ETF realm, the Financials Select Sector SPDR ETF (XLF) was down 0.4% to $24.38, while the Materials Select Sector SPDR ETF (XLB) has fallen 1.3% to $54.39. The Energy Select Sector SPDR ETF (XLE) has tumbled 2.1% to $66 a share.