NEW YORK (AP) — Stocks gave up a big rally and took a dive in afternoon trading Wednesday after the Federal Reserve raised interest rates again and signaled it’s likely to keep raising them next year. The market finished at its lowest level since September 2017.
The U.S. central bank said it expects to increase interest rates at a slightly slower pace next year, and also said it isn’t planning any changes in the gradual shrinking of its large bond portfolio. But investors appeared to hope the Fed would unveil a sharper slowdown in interest rate hikes and other credit tightening policies because economic growth is likely to slow down.
The Dow Jones Industrial Average swung from a gain of 381 points right before the Fed’s decision was announced at 2 p.m. Eastern time to a closing loss of 351 points. The index is down almost 9 percent in December.
The rate increase, to a range of 2.25 percent to 2.5 percent, was the Fed’s fourth this year. Its benchmark interest rate is at its highest point since 2008, which means higher borrowing costs for many consumers and businesses.
Bond prices rose, sending yields sharply lower. The yield on the 10-year Treasury note fell to 2.77 percent from 2.84 percent immediately before the Fed’s announcement and 2.82 late Tuesday. That’s a substantial move for that benchmark lending rate. Bonds yields are benchmarks for many kinds of long-term loans including mortgages.
The Fed is now forecasting two increases in rates in 2019 instead of three. The central bank expects the long-term level of its main interest rate will be 2.8 percent, down from an earlier projection of 3 percent.
The yo-yo movements for the stock market were a result of markets trying to parse Fed Chairman Jerome Powell’s comments, which essentially were: The economy is strong enough to warrant a rate increase now, but not so strong to need three rate increases, as the Fed had indicated a few months ago.
“Chairman Powell was threading the needle today,” said Frances Donald, head of macroeconomic strategy at Manulife Asset Management. “He had to say that the economic picture is not as good as three months ago, while also saying that the pillars of the economy remain intact. And markets have to react, live, to that ‘on the one hand, on the other hand’ that Powell has to play in this economy.”
But Powell may have failed to smooth the market’s key anxieties. They fear that continued increases in interest rates will slow the economy too dramatically. They’re also concerned about the trade dispute between the U.S. and China, which threatens economic growth and corporate profits.
Internet, technology and consumer-focused companies dropped. Facebook fell sharply after the New York Times reported that the social media network gave companies more access to users’ personal data than it has previously said. The report said Facebook had arrangements with more than 150 companies including Microsoft, Amazon, Spotify and Netflix that some companies read, write and delete users’ private messages or see the names of a user’s friends or their news feeds without their consent.
Separately, the District of Columbia sued Facebook for allowing Cambridge Analytica, a data-mining firm working for the Trump campaign, to improperly access data from as many as 87 million Facebook users.
Facebook lost 7.2 percent to $133.25. It’s down 39 percent since late July on concerns about a slowdown in user growth, multiple privacy and safety scandals, as well as the possibility of increased regulation in the future.
FedEx plunged after saying international shipping, especially in Europe, fell in the latest quarter. FedEx also said the U.S.-China trade dispute is affecting its business. The shipping company posted a smaller profit than analysts expected and said it will cut spending and offer buyouts to some workers to help make up for the shaky results.
FedEx stock lost 12.2 percent to $162.51. It has dropped 35 percent this year. Rival UPS lost 3 percent to $94.32 and has slumped 21 percent in 2018.
The Dow fell 1.5 percent to 23,323.66. The S&P 500 skidded 39.20 points, or 1.5 percent, to 2,506.96. It’s tumbled 14.5 percent in the last three months, including a loss of 9.2 percent so far in December.
The Nasdaq composite gave up 147.08 points, or 2.2 percent, to 6,636.83. The Russell 2000 index, which has suffered broader declines than the rest of the market, fell 27.95 points, or 2 percent, to 1,349.23.
Despite the losses, David Kelly, the chief global strategist for JPMorgan Funds, said the market will ultimately react to the health of the economy. He said the Fed’s moves Wednesday made sense and could prolong the already long-lasting growth in the U.S.
“The Fed behaving in a very prudent, balanced way increases the possibility of a very balanced expansion” continuing, he said.
Oil prices turned higher after plunging a day earlier on worries about rising supplies and weakening global growth, which could weigh on demand.
Benchmark U.S. crude climbed 2.1 percent to $47.20 a barrel in New York. It dropped 7 percent Tuesday and closed at a 16-month low, and has fallen almost 40 percent since Oct. 3. Brent crude, used to price international oils, rose 1.7 percent to $57.24 a barrel in London.
Wholesale gasoline rose 2.7 percent to $1.39 a gallon and heating oil added 2.9 percent to $1.81 a gallon. Natural gas lost 2.9 percent to $3.73 per 1,000 cubic feet.
Energy company stocks fell again. They’re trading at their lowest levels since early 2016.
The dollar was down for the day and recovered slightly after the Fed’s move. The dollar slipped to 112.36 yen from 112.53 yen. The euro rose to $1.1368 from $1.1357 and the British pound dipped to $1.2621 from $1.2639.
European stocks rose after Italy’s government reached an agreement with the European Commission on its budget plans. The Italian FTSE MIB jumped 1.6 percent. Britain’s FTSE 100 rose 1 percent while Germany’s DAX added 0.2 percent and the CAC 40 in France rose 0.5 percent.
Japan’s Nikkei 225 index fell 0.6 percent and while South Korea’s Kospi rose 0.8 percent. Hong Kong’s Hang Seng was 0.2 percent higher.
Gold rose 0.2 percent to $1,256.40 an ounce. Silver added 0.8 percent to $14.82 an ounce. Copper climbed 1.9 percent to $2.72 a pound.
Business Writer Stan Choe contributed to this story from New York
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP
What the partial government shutdown reveals about American’s finances
The partial government shutdown has been going on for nearly a month, with no end in sight. About 800000 government workers, according to politicians, are essentially getting paid not to work, but their paychecks won’t come until after the partial shutdown is over. Politicians are using this plight to tug at the general public’s heartstrings in the direction of their agenda. However, every politician and almost every media outlet is ignoring truth, to avoid offending people.
The truth of the matter is: if a person doesn’t have enough money saved up for such a time as this, they suck with finances. If a family is woefully unprepared for an emergency situation, they suck with money. These are objective facts, even Biblical. However, I do not write this to shame those 800000 government workers. After all, the crocodile tears of politicians would be wholly ineffective, if the average American could not see the horror is a month’s wage deferred. American’s finances are in disarray to put it mildly. NBC News reported how majority of Americans are living paycheck to paycheck.
Though the parameters of what constitutes a livable wage varies greatly according to where you live, these staggering statistics show just how few of us have the means to make ends meet. Depending on where they live, even people who earn $100k per year say they’re living paycheck-to-paycheck, and 59 percent of people making that kind of money admitted to carrying debt. Of those 59 percent, 56 percent say they’re heavily in debt.
And that emergency stash of six month’s pay that experts keep saying we should put away? For more than half of us, it’s just not feasible. According to this survey, 56 percent of us can barely save $100 per month. All things considered, when you break it all down, most of us are just one misfortune away from financial oblivion.
Yet despite the woeful unpreparedness of most Americans to finance an emergency, Americans spend. We have the latest IPhone, subscribe to Amazon Prime, have $200 doorbells on our homes, dine at fast casual restaurants, and drink Starbucks. And despite mandatory financial literacy classes in many schools, we push young people to pursue a six figure education. A recent survey done by YCharts found that nearly two-thirds of millennials aged 22 to 37 believed that they would have seven-figure wealth by the age of 45 or sooner. While seemingly outlandish, this study presented a more optimistic view of the generation’s finances than one might expect. Though with similar spending habits as Gen Xers, it’s overoptimistic to think this generation doesn’t overspend.
We often joke about Congress not balancing the budget like normal people run their finances. Yet in a country and culture of fiscal irresponsibility, it should be unsurprising, though disappointing, that there’s 21 trillion dollars worth of debt.
A reminder to GOP lawmakers from Justin Amash
When Representative Justin Amash (R-MI) hadn’t been in Washington DC for very long when he said this amazing quote. At the time, many weren’t paying much attention. After all, many Republicans say similar things when they get to DC, but over time they become jaded, corrupted, or start to get used to being in the DC Country Club.
Amash is different. He has remained consistent with his message and views throughout his career. Now, it’s time for other Republicans to remember what they were sent to Washington DC to do in the first place. Defense of the Constitution is their top priority as it’s the best protection against a government that wants desperately to control every aspect of our lives. From healthcare to the internet to how we use our energy, government intervention has become so commonplace, it’s often hard to see the fabric of our nation behind all the layers of bureaucracy that has been placed on top of it.
“I follow a set of principles, I follow the Constitution. And that’s what I base my votes on. Limited government, economic freedom and individual liberty.”
If more Republicans followed the same principles and didn’t just use them in campaign speeches, we may actually be able to return liberties that have been taken and remove layers of government that have been formed unnecessarily.
Larry Elder, Sean Hannity discuss the shutdown
Radio host Larry Elder joined Sean Hannity on Fox News tonight to break down the government shutdown. Elder pointed out that President Obama was being urged by advisers, including Rahm Emmanuel, to abandon Obamacare, but Nancy Pelosi urged him to go big or go home.
Later, they discussed the Speaker of the House’s refusal to meet with Angel Moms. Elder asked what she would say to them. Hannity said she should have given them condolences for their losses.
The talking heads on Fox News keep repeating the same narratives, but it’s not working. This is an example of mainstream media playing to the base by repeating the narrative for cheers from the crowd but failing to present better information the Republican base can use to argue for the border wall.
Many on the right, particularly in media, are failing to make a compelling case for the wall. They need to adjust their talking points if they really want their audience to help sell the idea to the rest of America.
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