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.
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. Facebook lost 7.2 percent to $133.25.
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.
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, 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. South Korea’s Kospi rose 0.8 percent.
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.