[New York Stock Market] Fed Signals Additional Rate Hikes... Dow Closes Down 1.21%

All Three Major Indices Decline
Year-End Median Policy Rate at 4.1%
Further 0.25 Percentage Point Hike Possible Within the Year
Market Eyes Potential Bond Market Stabilization

On September 16 (local time), all three major indexes on the New York Stock Exchange closed lower. Investor sentiment toward risk assets was significantly dampened after the U.S. central bank, the Federal Reserve (Fed), raised its benchmark interest rate for the first time since 2023 and indicated the possibility of additional hikes within the year.

On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 631.21 points (1.21%) from the previous trading day to close at 51,461.90. The S&P 500 Index, which focuses on large-cap stocks, declined 33.92 points (0.45%) to 7,551.81, while the tech-heavy Nasdaq Composite index decreased 3.14 points (0.01%) to 25,978.42.

New York Stock Exchange. New York, USA – Special Correspondent Yoonjoo Hwang

The market focused on the September Federal Open Market Committee (FOMC) meeting. With long-term U.S. Treasury yields reaching their highest levels since 2007 due to inflation concerns, a rate hike was seen as inevitable, and attention turned to whether there would be additional increases within the year.

At the September FOMC, the Fed raised the federal funds rate target range by 0.25 percentage points, from 3.50–3.75% per annum to 3.75–4.00% per annum. This was the first rate hike since July 2023, and all 12 committee members voted unanimously in favor.

Kevin Wash, Federal Reserve Chair, Yonhap News Agency

The rate increase itself was anticipated by the market, so at one point during trading all three indexes moved higher. However, following the Fed's rate decision and Federal Reserve Chair Kevin Wash's press conference, the indexes turned downward. Selloffs accelerated as Wash repeatedly emphasized inflationary risks during the press conference.

Chair Wash stated, "The clear fact is that inflation is too high and has remained at an elevated level for too long," adding, "Looking at this summer's price indices, we cannot conclude that the underlying trend has meaningfully improved."

Dot Plot Year-End Median at 4.1%... Signals Additional Increase This Year

September FOMC

The Fed’s released dot plot also heightened the prospect of further tightening. FOMC participants forecast a year-end median policy rate of 4.1% per annum. Considering the current rate level, CNBC reported that this signals an additional 0.25 percentage point rate hike within the year.

In the market, the probability of the Fed raising rates again at the October meeting was priced at about 50%. The yield on the U.S. two-year Treasury, which is sensitive to policy rates, jumped to its highest point since 2024, and the 10-year yield also surpassed 5% again during Chair Wash’s press conference. The dollar also strengthened.

Bloomberg reported that Chair Wash’s comment on “withdrawing some accommodative policy” unnerved the bond market. As Wash assessed that financial conditions remained not sufficiently tight even after this hike, the market found it difficult to judge how much further the Fed might raise rates.

Krishna Guha, a strategist at Evercore, commented, “Chair Wash’s press conference was consistent, confident, and hawkish without being excessive. However, describing the rate hike as a ‘partial withdrawal of accommodative policy’ made it harder to gauge how much further rate increases the Fed considers necessary.”

Seema Shah, Chief Global Strategist at Principal Asset Management, said, “The debate is no longer about whether rates will rise again, but about how many additional rate hikes there will be. The unanimous decision shows that even dovish members supported the increase due to rising energy prices and persistent inflation.” She continued, “The likelihood of just one more hike is now very low,” and predicted that the Fed is likely to raise rates at least one more time to maintain policy credibility.

Will the Fed’s Tightening Steady the Bond Market... International Oil Prices Decline

There is also analysis that the Fed’s decisive response to inflation could help stabilize the bond market over the long term. Anjay Skiba of RBC Global Asset Management suggested, “After the initial price adjustment, Chair Wash’s clear message could support long-term Treasury prices.”

Alex Giuliano of Resonate Wealth Partners commented, “This decision sent a message to the market that the Fed is not just talking about inflation but is taking action. Although a single 0.25 percentage point hike will not immediately bring down inflation, it could help stabilize the bond market.”

International oil prices finished lower as supply concerns were alleviated by remarks from U.S. Energy Secretary Chris Wright. In an interview with CNBC, Secretary Wright explained that the shutdown of the Saudi oil pipeline connecting the Red Sea via the Strait of Hormuz would be “a short and temporary suspension lasting a few days.” Expectations that crude shipments would be normalized in a short time led to the decline in global oil prices.

On the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude futures closed at $102.43 per barrel, down 3.21% from the previous session. On the ICE Futures Exchange, November Brent crude fell 2.69% to settle at $105.83 per barrel.

By sector, financials led the Dow’s decline. JPMorgan Chase closed down 1.01%, Goldman Sachs fell 3.96%, and Morgan Stanley dropped 1.87%. ExxonMobil, a major oil company, ended down 3.54%, and Chevron fell 2.86%.

Major technology and semiconductor stocks performed well. Nvidia rose 0.82%, AMD increased 1.65%, Seagate gained 1.47%, Intel climbed 4.03%, SK hynix ADR was up 0.02%, and TSMC advanced 0.96%. On the other hand, Micron Technology slipped 0.11%, and Qualcomm fell 1.58%.

This content was produced with the assistance of AI translation services.