Stocks fell in late afternoon trading on Wednesday after Federal Reserve Chair Jerome Powell signalled that the central bank has plenty of room to raise interest rates before it could harm the economy. The Dow Jones Industrial Average fell over 100 points, after being up more than 500 points earlier in the session. The S&P 500 also fell about 0.2%, while the Nasdaq slipped near its flatline.
The central bank said in a statement Wednesday following its January policy-setting meeting that a quarter-percentage-point increase to its benchmark short-term borrowing rate is expected to happen soon.
"With inflation well about 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate," the Federal Open Market Committee said in a statement.
Here's how the market settled on Wednesday:
S&P 500 Index
Dow Jones Industrial Average
Nasdaq Composite Index
Fed Chair Powell signals easing monetary policy support, prolonged inflation:
Powell told reporters during a post-FOMC meeting press conference that the economy is now strong enough on its own, and will no longer need intense monetary policy support as it continues to recover from its pandemic-era lows.
"In light of the remarkable progress we've seen in the labor market and inflation that is well-above our 2% long-run goal, the economy no longer needs sustained high levels of monetary policy support," Powell told reporters.
However, Powell noted that it will take a while for the central bank to lower its balance sheet moving forward.
"The balance sheet is substantially larger than it needs to be," Powell said. "There's a substantial amount of shrinkage in the balance sheet to be done. That's going to take some time. We want that process to be orderly and predictable."
Powell also noted that there's a risk that inflation will not decrease back toward its pre-pandemic levels in the near-term, and that the rise in prices could accelerate.
"Inflation risks are still to the upside in the views of most FOMC participants, and certainly in my view as well. There's a risk that the high inflation we are seeing will be prolonged. There's a risk that it will move even higher," Powell said, adding that supply chain issues were taking longer to resolve than previously anticipated.
New U.S. home sales jumped in December:
Sales of new homes in the United States rose at a greater-than-expected rate in December, underscoring continuously high demand for housing even as prices increase and supply remains tight.
New home sales increased 11.9% month-over-month in December, according to the U.S. Commerce Department's latest report published Wednesday, bringing sales to a seasonally adjusted annualized rate of 811,000. That rate marked the highest amount of sales since March 2021. In November, new home sales rose by a downwardly revised rate of 11.7%.
Here's how market benchmarks started trading soon after open:
S&P 500 Index: +1.38% or +60.00 points to 4,416.45
Dow Jones Industrial Average: +0.71% or +242.46 points to 34,540.19
Nasdaq Composite Index: +2.32% or +314.31 points to 13,853.60
