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US markets end lower after fed raises interest rates

23 Mar 2023 Evaluate

The US markets ended lower on Wednesday after the Federal Reserve announced its decision to continue raising interest rates despite recent turmoil in the banking industry. The Fed said it has decided to raise the target range for the federal funds rate by another 25 basis points to 4.75 to 5.0 percent. While the interest rate hike was widely expected, some traders have been holding out hope the Fed would leave rates unchanged. The Fed also said additional policy firming may be appropriate, although that marks a shift from saying ongoing increases in rates will be appropriate. The central bank's latest projections suggest the Fed plans to raise rates just one more time this year to a range of 5.0 to 5.25 percent.

The Fed described the U.S. banking system as sound and resilient despite the recent failures of Silicon Valley Bank and Signature Bank. The Fed acknowledged recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation but noted the extent of these effects is uncertain. On the sectoral front, banking stocks fell sharply following the rate hike by the Fed, resulting in a 4.7 percent nosedive by the KBW Bank Index. Substantial weakness also emerged among rate-sensitive commercial real estate stocks, with the Dow Jones U.S. Real Estate Index plunging by 3.6 percent. Oil service stocks also moved sharply lower despite an increase by the price of crude oil, dragging the Philadelphia Oil Service Index down by 3.0 percent.

Dow Jones Industrial Average fell 530.49 points or 1.63 percent to 32,030.11, Nasdaq dropped 190.15 points or 1.6 percent to 11,669.96 and S&P 500 was down by 65.9 points 1.65 percent to 3,936.97.

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