As expected the Federal Reserve left interest rates unchanged at today’s meeting of the Open Market Committee. But in its post-meeting statement, the last in the chair for Janet Yellen, the central bank added language that points toward a slightly more aggressive schedule for raising interest rates. “The committee expects,” the statement said, “that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.” The use of “further” was new and to Fed watchers seemed a signal that the Fed might be looking at four interest rate increases in 2018 rather than three. In addition, the Fed wrote that inflation “is expected to move up this year and to stabilize” around the central bank’s 2% target. That’s a bit more aggressive a projection than that in the December statement.
That language was enough to put the brakes on a good start to the day for stocks. The Standard & Poor’s 500, for example, dropped from 2832.94 at 2 p.m. New York time to 2813.45 at 2:50 on the Fed’s statement.
For the day the S&P 500 managed a tiny 0.05% gain and the Dow Jones Industrial Average advanced 0.28%. Not exactly a hearty recovery from yesterday’s drop but still a return to stability.
Other markets returned to the pre-Tuesday pattern. Gold was up 0.64%. The Dollar Spot Index lost 0.03%. Oil picked up with West Texas Intermediate gaining 0.54% to $64.85 a barrel. The yield and prices on the 10-year Treasury were unchanged for the day at 2.72%.
Earnings helped stabilize U.S. stocks with Boeing (BA) climbing 4.93% on the day after the company announced, before the market open, that it had beat Wall Street estimates. However, after the closing bell, Facebook (FB) reported very mildly disappointing user growth to 1.40 billion active users instead of the forecast 1.41 billion. The shares fell 4.49% in after-hours trading. I suspect most of this was profit taking.