Stock market news live updates: Markets extend losses, paring relief rally gains – Yahoo Finance
Stocks declined on Thursday after staging a rally in yesterday’s session as traders welcomed a Federal Reserve decision to ramp up the pace of its taper and leave interest rates unchanged — for now.
The Dow tumbled more than 100 points, and the Nasdaq shed more than 200 points, or 1.8%. The S&P 500 also turned red in the afternoon after opening the day higher.
Meanwhile, President Joe Biden signed a bill that averted the U.S. government from defaulting. The bill raised the U.S. debt limit to $31.4 trillion from $2.5 billion.
On Wednesday, Fed officials outlined plans to accelerate the wind down of monthly bond purchases at twice the tempo previously expected, putting the central bank on track to phase out the program completely by March. In a hawkish pivot on how aggressively monetary policymakers planned to combat inflation, the Federal Open Market Committee also signaled it was likely to raise interest rates three times next year in a noticeable adjustment from September projections that reflected a 50-50 split on a rate hike in 2022.
“Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to elevated levels of inflation,” the FOMC said in its statement. The committee also noted that Omicron and other new variants of COVID-19 remain risks to the economic outlook.
“The upshot of these new forecasts is that the Fed has moved into line with market thinking,” Ian Shepherdson, chief economist at Pantheon Macroeconomics said in a note. “The key question now is the timing of the first hike?”
“If it weren’t for Omicron, we’d expect it in March, but experience elsewhere signals that the U.S. is about to see a massive, unprecedented surge in COVID cases, with unknowable — but likely temporary — consequences for the economy,” he wrote. “We think this will delay the first hike until May, with the next moves in September and December.”
The Fed’s so-called “dot plot,” a summary of individual members’ outlooks for economic conditions and interest rates, showed the median number of FOMC members expected three rate hikes in 2022, up to four in 2023 and two projected for 2024, reflecting a faster pace for rate increases than anticipated in September’s forecast.
“This is a big shift from the September summary of economic projections, but it’s not necessarily a big shift from what the market was already pricing in ahead of today’s meeting based on some of the more recent commentary we’ve had from officials and the recent data,” Wells Fargo …….
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