Stocks fall, yields rise after Fed signals rate hike ‘soon’

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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.”

The Wall St. street sign is framed by the American flags flying outside the New York Stock exchange, Friday, Jan. 14, 2022, in the Financial District. Stocks are opening with solid gains on Wall Street Wednesday, Jan. 26, led by technology stocks after Microsoft reported standout results for its latest quarter.

Stocks fell, giving up their gains from an early rally, and Treasury yields climbed Wednesday as investors weighed the Federal Reserve’s decision to leave its key interest rate unchanged, while signaling that it plans to begin raising interest rates “soon” as the central bank moves to fight inflation.

[Most read] Amy Schneider’s historic ‘Jeopardy!’ winning streak ends with loss to Chicago librarian Rhone TalsmaStock indexes initially rose, then eased back to just below where they were before the Fed’s statement was released at 2:00 p.m. ET., then flipped into the red as Fed Chair Jerome Powell took repeated questions about how and when the central bank will start letting its balance sheet shrink after buying trillions of dollars of bonds through the pandemic.

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 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.

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