Day Traders Diary

12/14/22

Stocks slid Wednesday as investors absorbed the Federal Reserve's latest interest rate hike decision in its efforts to crush inflation.

The Dow Jones Industrial Average fell 142.29 points, or 0.42%, to 33,966.35. The S&P 500 declined 0.61% to 3,995.32. The Nasdaq Composite dropped 0.76% to 11,170.89.

Major averages hit their lows of the session after Federal Reserve Chairman Jerome Powell signaled more data was needed before the central bank would meaningfully change its view of inflation. The Dow fell as much as 404.47 points, after climbing 287.01 points earlier in the day.

"The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path," said Powell.

The Fed delivered a widely anticipated 50 basis point rate hike at the conclusion of its December policy meeting. It's a smaller bump from the prior four consecutive rate hikes of 75 basis points. A basis point is equal to one-hundredth of one percent.

Fed officials also forecast raising rates through next year, not lowering rates until 2024. The central bank ultimately sees itself taking rates to 5.1% before it stops hiking, a so-called terminal rate that is higher than the 4.6% level it forecast in September.

Notably, the Federal Open Markets Committee left in a key part of the policy statement that it "anticipates that ongoing increases in the target range will be appropriate."

"The big issue that makes it hawkish is that the Fed's forecasts put the terminal rate at 5.1% for 2023 from 4.6% at the September meeting," said Jim Caron of Morgan Stanley Investment Management. "There's no tip of the hat to the notion that [the pace of] inflation is starting to decline. They just completely ignored it."

Treasury yields fluctuated during Powell's press conference, as the central bank indicated further rate hikes ahead.

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