Stocks fall, yields rise as Fed hints at pullback in support

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A person wearing a protective mask rides a bicycle in front of an electronic board displaying Japan's Nikkei 225 index at a securities house in the rain on Wednesday, June 16, 2021, in Tokyo.  Asian stocks were mixed in calm trading on Wednesday ahead of a US Federal Reserve meeting that could give clues as to what lies ahead with its massive support to markets.  (AP Photo / Eugene Hoshiko)

A person wearing a protective mask rides a bicycle in front of an electronic board displaying Japan’s Nikkei 225 index at a securities house in the rain on Wednesday, June 16, 2021, in Tokyo. Asian stocks were mixed in calm trading on Wednesday ahead of a US Federal Reserve meeting that could give clues as to what lies ahead with its massive support to markets. (AP Photo / Eugene Hoshiko)

PA

Stocks fell on Wall Street and bond yields rose on Wednesday after Federal Reserve officials signaled they could start easing the accelerator on their massive support to markets and the economy sooner than expected. The S&P 500 fell 0.5% after a set of long-awaited projections by Fed policymakers showed some saw short-term rates rise by half a percentage point by the end of 2023. The Fed chairman also said the central bank has started talking about the possibility of pulling out. its $ 120 billion monthly bond purchases were aimed at keeping long-term rates low. The yield on the 10-year Treasury bill was 1.56%.

THIS IS A CURRENT UPDATE. AP’s previous story follows below.

NEW YORK (AP) – US stocks fell and bond yields rose on Wednesday after Federal Reserve officials signaled they may start loosening the accelerator on their massive support to markets sooner than expected.

The S&P 500 was down 0.3% in afternoon trading after a set of long-awaited projections by Fed policymakers showed some of them are seeing short-term rates rise half a percentage point by the end of 2023. The Fed chairman also said he had started talking about the possibility of withdrawing his $ 120 billion in monthly bond purchases intended to maintain low long-term rates.

Very low interest rates have been one of the main sources of fuel for the stock market’s skyrocketing to record highs, with the most recent on Monday. Investors’ immediate reaction to the Fed’s comments was to send stocks lower and bond yields higher. But moves moderated when Fed Chairman Jerome Powell told a press conference that any change was probably still a long way off.

The Dow Jones Industrial Average was 174 points, or 0.5%, lower at 34,124 at 3:20 p.m. EST. He had lost as much as 382 points shortly after the Fed’s announcement. The Nasdaq composite fell 0.2%.

In the bond market, the 10-year Treasury yield climbed to 1.54% from 1.50% on Tuesday night. The two-year yield, which moves more closely with Fed policy expectations, fell from 0.16% to 0.20%.

In his press conference after the Fed’s announcement, Powell said the biggest near-term change for the markets will come when the Fed slows down its $ 120 billion in monthly bond purchases. He again said they would continue until “substantial progress has been made” in returning the economy to full employment and prices to stability. But he acknowledged that conditions have improved enough to start discussing it.

“You can think of this meeting as a discussion of talking about meeting,” he said.

A recent surge in inflation has raised fears that the Fed may need to tighten the tap on its support. Prices are surging for used cars, plane tickets and other things across the economy as she comes out of her coma caused by the pandemic. The consumer price index jumped 5% in May from the previous year, for example.

Fed policymakers on Wednesday raised their inflation expectations this year. The median projection for the Fed’s preferred inflation measure was 3.4%, down from 2.4% in March.

But the Fed still sees the explosion as only temporary as the economy weaves its way through supply shortages and other short-term factors. Fed officials forecast inflation to fall to 2.1% next year and to 2.2% in 2023.

Oracle fell 5.3% for the S&P 500’s biggest loss after presenting investment plans that could hurt its future profitability.

Furniture company La-Z-Boy fell 10.7% after warning investors that the significantly higher prices it pays for raw materials will reduce its profits for every dollar it sells.

General Motors rose 1.9% after announcing it would increase spending on electric and autonomous vehicles and add two battery factories in the United States.



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