U.S. stocks gave up gains on Wednesday and slipped into the red after the Federal Reserve delivered another excessive rate hike in its fight against stubborn inflation.
The central bank of the United States raised its prime rate by 0.75% for the third time in a row, pushing the federal funds rate to a new range of 3.0% to 3.25% — its highest level since 2008 — from the current range of 2.25% to 2.5%.
The benchmark S&P 500 fell 0.6%, while the Dow Jones Industrial Average tumbled 200 points. The tech-heavy Nasdaq Composite was down 0.7%. Meanwhile, the CBOE Volatility Index ( ^VIX ) — Wall Street’s gauge of “fear” — jumped 11% to 30.18.
Bond market activity was in focus after the Fed meeting. Treasury yields continued their perilous climb on Wednesday, with the rate-sensitive 2-year Treasury note above 4.1%, the highest level since 2007. The benchmark US 10-year bond held above 3.5%, its highest level since 2011.
Among the movers in the market early Wednesday was General Mills (GIS), which rose nearly 4% at the open after the company reported better-than-expected quarterly earnings and raised its full-year sales forecast as it benefited from higher prices for cereals, snack bars and foods for pets.
Beyond Meat (BYND) shares gained more than 2% after that announcing a partnership with Taco Bell (YUM) for their first menu collaboration: Beyond Carne Asada Steak. The news helped BYND snap out of a nearly 3% premarket drop after the meat substitute maker suspended COO Doug Ramsey over his arrest for allegedly bit a guy’s nose this weekend in a traffic accident.
Seam Repair (SFIX) shares fell nearly 5% after the company reported disappointing fourth-quarter revenue expectations and sales guidance and reported a decline in active customers.
US central bank officials are willing to provide a a third consecutive increase of 75 basis points to their benchmark interest rate on Wednesday at 2:00 PM ET. at the end of the policy setting discussions.
Market participants will also chime in on the remarks of Fed Chairman Jerome Powell after the meeting, along with U.S. central bank members’ economic forecasts and the latest dot chart showing each staff member’s forecast for the Fed’s short-term interest rate.
“The meeting-by-meeting and data-driven approach that central banks around the world have taken will allow for some easing in the pace of monetary policy tightening in the coming months, but central bankers have warned that such action will only happen if and when there is strong evidence of cooling inflation,” EY Parthenon chief economist Gregory Dako said in a note.
Across the Atlantic, Russian President Vladimir Putin announced a “partial mobilization” of Ukraine and vowed to annex the occupied territories. In a televised announcement, he called the actions “urgent, necessary steps to protect Russia’s sovereignty, security and territorial integrity.”
The threat of an escalation of Russia’s war against Ukraine rattled markets. Oil prices rose, with West Texas Intermediate (WTI) futures up 2.5% at $86.07 a barrel and Brent crude 2.4% higher at $92.81 a barrel. The dollar rose to a new record high, while the euro fell. In the crypto markets, Bitcoin (BTC-USD) fell back below $19,000.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc