Stock market today: live updates

Stocks tumbled on Wednesday as the Federal Reserve continued to hike interest rates while acknowledging that banking sector turmoil could put the brakes on an already fragile economy. Regional banking stocks led the decline.

The fall in the stock market and the drop in regional bank stocks were compounded by comments from Treasury Secretary Janet Yellen, who told the US Senate Appropriations Subcommittee that the US is not currently working on a “general insurance policy” for bank deposits.

The Dow Jones industrial average fell 530.49 points, or 1.63%, to close at 32,030.11. The S&P 500 decreased by 1.65% to end at 3,936.97. The Nasdaq composite fell 1.6% to close at 11,669.96.

At one point, the Dow was up as much as 201.29 points before falling lower. The S&P 500 and Nasdaq gained 0.9% and 1.3%, respectively, at their session highs.

“Financial conditions appear to have tightened,” noted Fed Chairman Jerome Powell. “We will see how serious this is and whether it continues. And if it is, it could easily have a significant macroeconomic impact, and we would factor that into our policy decisions,” he added. .

The Fed raised rates by 25 basis points, as widely expected. In a statement, the Fed’s policy committee said it will “closely monitor incoming information and assess the implications for monetary policy.” In addition, the central bank has removed the phrase “continued increases” from its statement.

On the upbeat side, the Fed’s latest forecasts called for just one more hike this year. But, Powell said at the press conference, the inflation battle is far from over.

“Today’s actions by the Fed are consistent with our long-held view that the Fed will raise rates to 5.125% and pause for an extended period of time,” Jefferies economist Thomas Simons said in a note. “Barring an increase in contagion risk within the banking sector, we expect the Fed to face a very similar policy decision in May, and they will be forced to hike again.”

The Fed’s rate hike stems from uncertainty about the health of the global banking sector. Earlier this month, Silicon Valley Bank and Signature Bank filed for bankruptcy, while UBS acquired rival Credit Suisse – a move forced by Swiss regulators to prop up the country’s banking sector.

Regional bank shares fell Wednesday after the announcement of a rate hike and Yellen’s statement that the Treasury is not considering a broad increase in deposit insurance. The S&P Regional Bank ETF (KRE) Wednesday’s trading session ended more than 5% lower.

Meanwhile, Powell noted that bank deposit flows had stabilized over the past week after the central bank and regulators moved to backstop depositors.

To be on the safe side, he also said, “I think we see the opportunity for credit tightening for now. We know that could have an effect on the macro economy.”

Read today’s market coverage in Spanish here.