U.S. stocks ended mixed on Wednesday after the Federal Reserve kept U.S. interest rates unchanged but signalled in new economic projections that borrowing costs will likely rise by another half of a percentage point by the end of this year. Trading was choppy and volume was heavy after the rate-setting Federal Open Market Committee (FOMC) reacted to a stronger-than-expected economy and a slower decline in inflation.
The new projections added a hawkish tilt to the Fed’s interest rate decision, showing policymakers at the median see the benchmark overnight interest rate rising from the current 5.00%-5.25% range to a 5.50%-5.75% range by the end of the year. Other data released Wednesday, showed a bigger-than-expected drop in U.S. producer prices in May due to a decline in the costs of energy goods and food signalled that inflation was cooling. Data a day earlier showed consumer prices moderated last month.
Shares of Tesla dipped 0.74%, putting the brakes on the electric car maker’s 13-session streak of gains, its longest ever. Over $43 billion worth of Tesla shares were traded, more than any other stock in the S&P 500. Heavyweight chipmakers Nvidia and Broadcom both rallied more than 4% and closed at their highest levels ever, lifting the Nasdaq and S&P 500. The Philadelphia semiconductor index jumped 1.5%, bringing its gain in 2023 to 48%. Intel Corp was the second-best performing stock on both the Dow Jones Industrial Average and also the S&P 500 behind Nike which was the top performer for both indices. Advanced Micro Devices gained over 2% after Reuters reported that Amazon’s cloud computing unit may use its new artificial intelligence chips.
Weighing on the Dow, UnitedHealth Group tumbled 6.4% after the health insurer warned of a spike in medical costs in the second quarter as more older adults undergo non-urgent procedures they had delayed during the pandemic. The Dow Jones Industrial Average fell 232.79 points, or 0.68%, to 33,979.33, the S&P 500 gained 3.58 points, or 0.08%, to 4,372.59 and the Nasdaq Composite added 53.16 points, or 0.39%, to 13,626.48.
U.S. Treasury yields were lower on Wednesday in choppy trading after the Federal Reserve left interest rates unchanged, as widely expected, but forecast another 50 basis points in hikes by the end of the year. The central bank kept rates at the 5.00%-5.25% range but in its new summary of economic projections (SEP) indicated a stronger-than-expected economy and a slower decline in inflation will result in a likely rise in borrowing costs by 50 basis points (bps) by the end of this year. In Treasuries, benchmark 10-year notes were down 4.5 basis points to 3.794%, from 3.839% late on Tuesday. The 30-year bond was last down 6.4 basis points to yield 3.8768%, from 3.941%and the 2-year note was last was unchanged to yield 4.6964%, from 4.696%.
The U.S. dollar slid on Wednesday after the Federal Reserve held interest rates steady, as expected, but signalled that borrowing costs will increase by another 50 basis points (bps) by end-December. The dollar index fell 0.29%, with the euro up 0.38% to $1.0832. The Japanese yen strengthened 0.20% versus the greenback at 139.94 per dollar, while Sterling was last trading at $1.2661, up 0.39% on the day.
In energy, crude oil futures added to losses after the Fed’s news. The commodity had given up earlier gains as traders weighed an unexpected, large build in U.S. crude oil against bullish demand growth forecasts. U.S. crude recently settled down 1.66% at $68.25 per barrel while Brent settled at $73.20, down 1.47%. Spot gold was up 0.3% at $1,949.89 per ounce. U.S. gold futures settled 0.5% up at $1,968.9. Silver rose 1.2% to $23.97 per ounce, platinum was steady at $976.19 and palladium jumped 1.8% to $1,385.77.