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Bloodbath in US Market after Fed Statement: More to Come?

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The broader market

Investors had anxiously awaited the US central bank’s final benchmark rate decision and statement today. Before the statement, all US indices were trading with a cautious note, but they all were in positive territory. However, all these daily gains were quickly erased as investors started to grasp the Federal Reserve’s statement. Let’s take a closer look.

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The Federal Reserve

The central bank raised its benchmark interest rates on Wednesday, as the majority of investors had expected. In its latest statement today, the Fed suggested that it would continue to encourage “maximum employment and price stability.”

However, the statement also noted, “The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.” The Fed’s comments came as a big blow to investors who were hoping for no rate hikes in 2019.

Bloodbath in the US market

At 3:34 ET, the major US indices—the S&P 500 benchmark, NASDAQ Composite Index (QQQ)(VTI), and Dow Jones—slumped 1.6%, 2.2%, and 1.5%, respectively.

Tech was one of the worst-affected sectors in today’s sell-off. Tech companies Apple (AAPL), Facebook (FB), Twitter (TWTR), Hewlett-Packard (HP), NVIDIA (NVDA), Qualcomm (QCOM), Intel (INTC), and Amazon (AMZN) were down 3.4%, 6.8%, 3.0%, 4.5%, 6.7%, 2.5%, 4.8%, and 4.0%, respectively.

Other large US companies General Motors (GM), Ford (F), Tesla (TSLA), and FedEx (FDX) were down 0.4%, 2.3%, 1.5%, and 12.4%, respectively.

What’s next?

The possibility of continual market weakness in the coming few sessions remains open as investors digest the chance of more rate hikes in 2019. Plus, uncertainties about the US–China (FXI) negotiations and fears of slowing economic growth could add fuel to this market sell-off.

Apart from the market sell-off, other major negative factors also hurt social media giant Facebook today. See Why Facebook Lost 7% Today to learn more.

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