US Stocks Waver Following Federal Reserve Rate Increase

U.S. stock indexes were wavering between gains and losses Wednesday after the Federal Reserve raised interest rates for the third time this year in the face of the strengthening economy.

Markets were widely expecting the move, and the announcement did not create big reactions for stocks or bonds, as can sometimes happen when investors are caught off guard. Stocks held onto their gains from the morning, while Treasury yields remained modestly lower.

Most investors expect a fourth rate increase in December with perhaps a few more in 2019, as the economy continues to strengthen. Rates are still low, but investors worry a quick jump would unsettle markets and halt what’s become the longest bull market for U.S. stocks on record.

KEEPING SCORE: The S&P 500 fell 9 points, or .3 percent, to 2,906 at closing time. The Dow Jones industrial average slipped 107 points, 0.4 percent, to 26,385, and the Nasdaq composite fell 17 points, or 0.2 percent, to 7,990. The Russell 2000, which tracks smaller companies, fell 5 points, or 0.3 percent, to 1,703.

FED WATCH: The Federal Reserve has been raising rates from their record lows, when they were at basically zero following the 2008 financial crisis. High rates in the past have been the death knell for economic expansions and bull runs for stocks, but analysts say markets can continue to rise as long as this rise in rates is gradual and for the right reasons.

“If the sense is that we’re overheating and inflation is a problem and will eat into corporate profits and a rise in interest rates will choke off growth, that will be a problem,” said Brian Nick, chief investment strategist at Nuveen. “But if rates go up more slowly because the economy is doing better, it’s not that big a deal.”

The Fed indicated Wednesday that it expects to raise rates one more time this year, three times in 2019 and once in 2020. Fed officials also raised their forecast for economic growth this year.

YIELDS: Treasury yields have been climbing steadily this year as the strengthening economy bolstered expectations for rate increases by the Fed.

The yield on the 10-year Treasury note is close to its highest level since 2011, but it dipped on Wednesday to 3.06 percent from 3.10 percent late Tuesday.

The two-year Treasury yield, which more closely tracks movements by the Fed, dipped to 2.82 percent from 2.83 percent and is close to its highest level in a decade.

VOTING YES: Shares of SurveyMonkey’s parent company, SVMK, surged in their first day of trading. After pricing its initial public offering of stock at $12 per share, SVMK jumped as high as $20.00 during morning trading. By late afternoon, it was at $18, up 50 percent.

DRESSED DOWN: Cintas, which provides workers’ uniforms, restroom supplies and other products to companies, had the sharpest loss in the S&P 500 despite reporting better earnings than analysts expected for the latest quarter. Growth in rentals fell short of some forecasts. Cintas lost 3.98 percent to $204.93.

MARKETS OVERSEAS: Indexes in Europe were mostly steady ahead of the Fed’s decision. France’s CAC 40 added 0.6 percent, while Germany’s DAX rose 0.1 percent. Britain’s FTSE 100 was also up 0.1 percent.

In Asia, Japan’s Nikkei 225 rose 0.4 percent, and the Hang Seng in Hong Kong jumped 1.2 percent.

COMMODITIES: Benchmark U.S. crude oil fell 1 percent to $71.57 per barrel. Brent crude, the international standard, lost 0.6 percent, to $81.34.

In other energy trading, wholesale gasoline fell 0.4 percent to $2.06 a gallon, heating oil slipped 0.2 percent to $2.30 a gallon and natural gas dropped 2 percent to $3.02 per 1,000 cubic feet.

Gold dropped 0.5 percent to $1,199.10 an ounce. Silver fell 0.6 percent to $14.40 an ounce and copper was little changed at $2.83 a pound.

CURRENCIES: The dollar dipped to 112.85 Japanese yen from 112.93 yen late Tuesday. The euro slipped to $1.1762 from $1.1767, and the British pound fell to $1.3184 from $1.3186.