Federal Reserve raise interest rates by 25 basis points
US stocks on Wednesday, 26 September 2018 surrendered earlier gains to close lower after the Federal Reserve raised interest rates by 25 basis points, as widely anticipated, and indicated its intent to tighten once more in December. All three benchmarks were nursing modest gains with about a half-hour left in trading before abruptly pivoting down.
The Dow Jones Industrial Average fell 106.93 points, or 0.4%, to 26,385.28. The S&P 500 dropped 9.59 points, or 0.3%, to 2,905.97. The Nasdaq Composite Index shed 17.11 points, or 0.2%, to 7,990.37.
Stocks were up modestly ahead of the release of the Fed's decision, which crossed the wires at 2:00 PM ET, and extended gains after the central bank removed the word 'accomodative' from its policy statement. However, that initial move was reversed, and then some, following a post-decision press conference from Fed Chairman Jerome Powell, during which he said the language change didn't signal a change in the Fed's path for rate hikes.
The central bank on Wednesday raised its target for its benchmark lending rates to a range between 2% and 2.25% and signaled it was prepared to increase again in December, as it also altered language that could mean a slowing in the pace of future increases.
The dollar index traded nearly flat at 94.125 after the Fed news. It had traded between a high of 94.40 and low of 93.95.
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Fed Chairman Jerome Powell was set to hold a news conference at 2:30 p.m. The market has penciled in a total four rate increases in 2018 and the FOMC statement suggests that that expectation will be met with one more rate increase in December rate hike.
Reviewing Wednesday's economic data, which included August New Home Sales and the weekly MBA Mortgage Applications Index - New Home Sales in August hit an annualized rate of 629,000, which is below the consensus of 630,000. The July reading was revised to 608,000 (from 627,000). The key takeaway from the report is that it reflects the affordability constraints that are increasing on the back of high prices and rising mortgage rates. To wit, the median sales price was up 1.9% year-over-year to $320,200 and the supply of new homes for sale stood at a 6.1-months' supply at the August sales pace versus 6.0 months a year ago.
Separately, the weekly MBA Mortgage Applications Index rose 2.9% to follow last week's increase of 1.6%.
Crude oil futures settled lower Wednesday, 26 September 2018 after a U.S. government report revealed that domestic supplies of crude oil unexpectedly edged higher for the first time in six weeks. Prices for crude, however, briefly pared some of their losses after President Donald Trump ratcheted up pressure on allies to adhere to coming U.S. sanctions on Iranian crude during a United Nations Security Council meeting.
November West Texas crude gave up 71 cents to settle 1% lower at $71.57 a barrel on the New York Mercantile Exchange. Prices traded at $71.78 before the supply data release, which coincided with Trump's comments to the U.N. Security Council on Wednesday.
Bullion prices ended lower on Wednesday, 26 September 2018. Gold prices settled with a loss on Wednesday, 26 Sept 2018 at their lowest in about three weeks, then edged higher in electronic trading shortly after the Federal Reserve's widely expected decision to raise a key interest rate for the third time this year.
The central bank on Wednesday raised its target for its benchmark lending rates to a range between 2% and 2.25% and signaled it was prepared to increase again in December, as it also altered language that could mean a slowing in the pace of future increases.
December gold fell $6, or 0.5%, to settle at $1,199.10 an ounce. December silver lost 0.6% at $14.401 an ounce.
Looking ahead, investors will receive a big batch of economic data on Thursday, including the advanced readings for August International Trade in Goods, Retail Inventories, and Wholesale Inventories, Durable Goods Orders for August, the third estimate for Q2 GDP, weekly Initial Claims, and August Pending Home Sales.
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