Wall Street ends down on nagging uncertainty about Fed rate path

U.S. stocks ended lower on Wednesday, reversing gains after comments by Federal Reserve Chair Jerome Powell left investors wondering what the U.S. central bank’s next move would be with interest rate hikes. Indexes initially held onto gains following the Fed’s statement. It increased interest rates by a quarter of a percentage point, as expected, and signaled it could pause further hikes.

The unanimous decision lifted the U.S. central bank’s benchmark overnight interest rate to the 5.00%-5.25% range, the 10th consecutive increase since March 2022.

Stocks started to swoon after the press conference following the statement. Powell said the Fed still views inflation as too high, and said it was too soon to say the rate hike cycle is over.

“The Fed continues to walk the tightrope, and that is they’re trying to strike a balance between their inflation fighting credibility while trying to engineer a soft landing,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

All of the major S&P 500 sectors ended lower, with energy and financials down the most. The KBW regional banking index was down 0.9%, extending this week’s sharp losses.

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