Blue-chips slip on Fed
Dow and S&P 500 fall, Nasdaq erases gains after Fed raises rates as expected, hints it's not done yet.
NEW YORK (CNNMoney.com) - Stocks slipped Tuesday after the Federal Reserve boosted a key short-term interest rate by a quarter-percentage point, as expected, and indicated it would continue to boost rates.
The Dow Jones industrial average (up 17.69 to 11,267.80, Charts) and the broader Standard & Poor's 500 (up 3.13 to 1,304.74, Charts) index both declined at around 2:30 p.m. ET, roughly 15 minutes after the announcement. Both had posted modest gains ahead of the news.
The tech-heavy Nasdaq composite (up 7.50 to 2,323.08, Charts) was barely lower. The Nasdaq had risen about 0.4 percent prior to the Fed news.
The Federal Reserve opted to boost the Fed funds rate, an overnight bank lending rate, by a quarter-percentage point to 4.75 percent, as had been expected. The increase was the 15th in a row since the central bank began its rate-hiking campaign in June of 2004.
This meeting was the first helmed by new Fed chair Ben Bernanke, who took over for Alan Greenspan following his retirement at the end of January.
In the closely-watched statement, the bankers went into greater detail than in recent statements about the health of the economy in the first quarter after a rough fourth quarter and the impact of higher energy prices and other inflationary factors.
However, the part of the statement that hints at future policy was unchanged from January, again stating that some further firming "may be needed." This may have disappointed stock investors who were hoping that the central bank would indicate the end to rate hikes was near.
Treasury prices tumbled, adding to earlier lower. The decline raised the yield on the benchmark 10-year note to 4.79 percent from 4.70 percent late Monday. Treasury prices and yields move in opposite directions.