An early market rally gave way to a broad slide for stocks and a surge in bond yields Wednesday after the Federal Reserve signaled it plans to begin raising interest rates "soon" to fight a spike in inflation that the central bank says is probably getting worse. Fed Chair Jerome Powell took repeated questions about how and when the Fed will start letting its balance sheet shrink after buying trillions of dollars of bonds through the pandemic. The S&P 500 fell 0.1% to 4,349.93 after giving up an early gain of 2.2%. The Dow Jones Industrial Average fell 129.64 points, or 0.4%, to 34,168.09. The Nasdaq rose 2.82 points, or less than 0.1%, to 13,542.12. The yield on the 10-year Treasury rose to 1.86%.
The market had been solidly higher prior to the release of the Fed statement, a turnaround following several days of volatile swings as investors try to gauge whether the Fed will succeed in its new effort to fight inflation, the AP reports. The central bank had been widely expected to continue drawing back its stimulus measures ahead of raising interest rates in the coming months. For nearly two years, investors had poured money into stocks, confident that the Federal Reserve would help keep share prices upright. With that support going away, markets have been hit with a bout of volatility. The S&P 500 is down 9.5% so far this year.
The 11 sectors in the S&P 500 turned lower, with communication, health care, and industrial stocks weighing down the index the most. Strong earnings reports and financial forecasts underpinned gains for some stocks. Microsoft rose 2.9% after reporting standout results for its latest quarter on solid demand for its cloud-computing services and work software. Chipmaker Texas Instruments rose 2.5% after giving investors a solid earnings report and financial forecast.
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