U.S. stocks finished the trading session lower as investors digested the afternoon release of the Fed’s rate decision, where it increased its target range for the Fed funds rate, as widely expected, and also released updated economic projections. News on the equity front was headlined by AT&T’s victory in Federal court in regard to its $85 billion bid to acquire Time Warner. The U.S. dollar traded lower, after momentarily spiking in the wake of the Fed decision, and Treasury yields gained ground. Gold and crude oil prices were higher.

The Dow Jones Industrial Average (DJIA) declined 120 points (0.5%) to 25,201, the S&P 500 Index lost 11 points (0.4%) to 2,776, and the NASDAQ Composite shed 8 points (0.1%) to 7,696. In moderately heavy volume, 959 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil traded $0.28 higher to $66.64 per barrel and wholesale gasoline was up $0.03 at $2.12 per gallon. Elsewhere, the Bloomberg gold spot price moved $4.03 higher to $1,300.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.3% lower at 93.57.

At 2:00 p.m. ET, the Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting. As expected, the Fed increased its target range for the Fed funds rate to 1.75%-2.00%. The Committee recognized that since it last met in May, the labor market has continued to strengthen, economic activity has been rising at a solid pace and on a 12-month basis, both core and overall inflation have moved close to 2%. Updated economic projections were also released, with the Fed slightly increasing its current year and 2019 forecasts for inflation and mildly lowering its unemployment rate projection for the year, while leaving its GDP forecasts mostly unchanged. Additionally, the interest rate expectations, known as the “dots plot”, showed that most members now anticipate at least four rate hikes for the year, up from the previous consensus for three. In his scheduled press conference after the statement, Chairman Jerome Powell did not comment on trade specifics, but did say that members have been notified of antidotal concerns about changes in trade policy from companies. The Chairman also announced that there will be a press conference following every meeting starting next year.

Treasuries declined following the Fed decision, with the yield on the 2-year note advancing 3 bps to 2.57% and the yield on the 10-year note increasing 1 basis point to 2.97%, while the 30-year bond rate was nearly unchanged at 3.09%. This week, Treasury yields had paused in their recent grind higher after slumping in May, with the 10-year note again within striking distance of the 3.00% mark, while the U.S. dollar has traded in a tight range, with the trifecta of central bank meetings scheduled for the week keeping investors on the fence.

Schwab Center for Financial Research – Market Analysis Group

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