Dow drops 230 points as Fed signals 2 more rate hikes this year

By Ovunc Kutlu

ISTANBUL (AA) - The Dow Jones Industrial Average closed more than 230 points lower with US stocks finishing mixed on Wednesday as the Federal Reserve signaled two more rate hikes this year despite skipping a rate hike at its June meeting.

The blue-chip Dow fell 232 points, or 0.68%, to close at 33,979.

The S&P 500, on the other hand, rose less than four points, or 0.08%, to finish the session nearly flat at 4,372.

The tech-heavy Nasdaq increased 53 points, or 0.39%, to end the day 13,626.

The Fed skipped an interest rate increase at the conclusion of its two-day meeting, as widely expected, and kept its federal funds rate unchanged between the 5%-5.25% range.

The central bank's latest projections, however, indicate that two more rate hikes by 25 basis points each are possible for the remainder of the year.

Fed Chairman Jerome Powell, in his post-meeting press conference, said it will take time for the full effects of rate hikes to be realized on inflation.

"Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at this meeting, considering how far and how fast we’ve moved, we judged it prudent to hold the target range steady," he said.

The probability of the Fed announcing a rate hike of 25 basis points at the conclusion of its next two-day meeting on July 26 was at 64.5% a half hour after Wall Street’s closing bell, according to the FedWatch Tool provided by the US-based Chicago Mercantile Exchange Group.

The VIX volatility index, also known as the fear index, plummeted 5% to 13.88. The 10-year US Treasury yield, meanwhile, dropped 1.1% to 3.800%.

The dollar index shed 0.34% to 102.99, and the euro rose 0.4% to $1.0836 against the greenback.

Precious metals were mixed, with gold flat at $1,943 per ounce but silver rising 1.1% to $23.93.

Oil prices gave up earlier gains and were down around 0.9%, with global benchmark Brent crude at $73.67 per barrel and US benchmark West Texas Intermediate crude at $68.78.