From Kiplinger · · 2m
Dow drops 631 points as Fed hikes rates for first time in years
The Federal Reserve raised rates 25 basis points, sending stocks lower as Chair Kevin Warsh pledged to fight inflation.
In brief
The Federal Reserve raised rates 25 basis points, sending stocks lower as Chair Kevin Warsh pledged to fight inflation. The Fed's first rate hike in three years signals a renewed focus on fighting inflation, though history shows markets often recover after similar moves. Originally reported by Kiplinger.
Fed hikes rates, stocks tumble
The Federal Reserve raised interest rates by 25 basis points Wednesday, its first hike in three years. The Dow fell 631 points, or 1.2%.
Warsh pledges price stability
Fed Chair Kevin Warsh said the unanimous decision shows the committee's commitment to stable prices. He reiterated that pledge despite questions about political pressure.
“I said we will deliver stable prices. Today's decision is consistent with that.”
Economy strong but inflation elevated
The Fed noted solid economic expansion and resilient domestic spending. However, inflation remains elevated and uncertainty is high due to geopolitical developments.
“Inflation remains elevated.”
One more hike expected this year
The federal funds rate now sits at 3.75% to 4.00%. The Fed's projections show members expect one more rate increase before year-end.
History suggests markets can recover
After past rate hikes following six-month pauses, the S&P 500 gained an average of 5.5% over the next 12 months. The average drawdown was 9.4%.
Retail sales beat expectations
August retail sales jumped 1.2%, exceeding forecasts of 0.7%. The strong consumer spending could put more pressure on inflation going forward.
OpenAI seeks trillion-dollar valuation
OpenAI is in talks with investors about a funding round valuing the ChatGPT maker at over $1.2 trillion. The company now has 1 billion active users.
OpenAI delays IPO plans
CEO Sam Altman told Fortune that OpenAI will postpone its anticipated IPO. He cited safety concerns as making now an ill-advised moment to go public.
“Given everything happening with safety, right now would be an ill-advised moment to go public, and we don't feel pressure on that.”
J.B. Hunt plunges on fuel costs
The trucking company fell 13.3% after warning that diesel fuel costs will drive earnings down 5% to 10% this quarter. National diesel prices hit a record $6.31 per gallon.
What matters most
The Fed's first rate hike in three years signals a renewed focus on fighting inflation, though history shows markets often recover after similar moves.
