Statues adorn the facade of the New York Stock Exchange, Tuesday, Sept. 13, 2022, in New York. (AP Photo/Julia Nikhinson)
NEW YORK (AP) – U.S. stocks are mixed Wednesday after the Federal Reserve said it may not cut interest rates next year by as much as it earlier thought, regardless of how much Wall Street wants it.
The S&P 500 was 0.1% higher in afternoon trading after briefly turning lower shortly after the announcement. The Dow Jones Industrial Average was up 216 points, or 0.6%, at 34,734, as of 2:36 p.m. Eastern time, and the Nasdaq composite was 0.1% lower.
The Fed held its main interest rate steady, as was widely expected. Officials also indicated they may raise the federal funds rate one more time this year, as the Fed tries to get inflation back down to its target of 2%.
Perhaps more importantly for the market, Fed officials also suggested they may cut rates next year by only half a percentage point. Three months ago, they were penciling in a full percentage point of cuts in 2024.
Treasury yields in the bond market immediately turned higher after the Fed released its projections. They had already been climbing for months after strong reports on the U.S. economy suggested the Fed may need to keep interest rates higher for longer in order to fully drive down pressures on inflation.
The yield on the 10-year Treasury rose to 4.34% from less than 4.32% shortly before the Fed’s announcement. It’s near its highest level since 2007, though it’s still down from 4.37% late Tuesday.
The two-year Treasury yield, which more closely tracks expectations for Fed action, rose to 5.12% from 5.04% shortly before the Fed’s announcement.
The Fed has already hiked its main interest rate to the highest level in more than two decades. That’s helped inflation come down considerably from its peak above 9% last year, but a recent upswell in oil prices has complicated the trajectory. Last month, inflation accelerated to 3.7%.
Investors crave cuts to interest rates because they give an immediate boost to prices of all kinds of investments. Some of the biggest beneficiaries tend to be high-growth companies, and tech stocks have swung particularly sharply with expectations for rates.
Rising expectations for higher-for-longer rates caused Big Tech stocks to be among the S&P 500’s weights Wednesday. Apple, Microsoft and Nvidia all fell about 1%.
“Future meetings will be a tug-of-war between markets who want cuts and a Fed that is scared its job isn’t done,” said Brian Jacobsen, chief economist at Annex Wealth Management.
On Wall Street, shares of Textron climbed 6.2% for one of the biggest gains in the S&P 500 after it announced a deal where NetJets has the option to purchase up to 1,000 of its Citation business jets over the next 15 years.
Pinterest rose 5.5% after the company gave forecasts and recaps of its decisions at its investor day that pushed analysts to upgrade how high they think its stock could go.
Beauty products company Coty climbed 5.2% after it raised its forecasts for the year due to strong demand for its new Burberry Goddess fragrance and other products.
On the losing end of Wall Street, Instacart gave back some of its gains from its first day of trading as a public stock. It dropped 5.3%.
Arm Holdings, another company recently off a highly anticipated initial public offering of stock, also fell. It lost 3.8%.
Shares of Klaviyo, which helps advertisers market over email and text messaging, jumped 15.8% on their first day of trading.
In stock markets abroad, the FTSE 100 in London rose 0.9% after a report showed U.K. inflation fell unexpectedly in August to its lowest level since Russia launched its invasion of Ukraine.
Indexes were mostly weaker in Asia after data showed Japanese exports fell from year-ago levels for the second straight month. Exports to China sank 11%, as the world’s second-largest economy continues to underperform expectations.
Officials in Beijing acknowledged challenges in boosting growth but told reporters they were confident that a recovery was underway and that they had the capacity to ensure stability in financial markets.
Japan’s Nikkei 225 fell 0.7%, Hong Kong’s Hang Seng dropped 0.6% and stocks in Shanghai slipped 0.5%.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
