Investing.com – The Dow slumped Wednesday as the Federal Reserve hiked rates and delivered a less dovish outlook on tightening than many had expected.
The Dow Jones Industrial Average fell 1.49%. The S&P 500 dropped 1.54%, while the Nasdaq Composite slumped 2.17%.
A sea of red swept across Wall Street on fears the Fed could overshoot on policy, even as the central bank cut its outlook on rate hikes in 2019 amid expectations for a slower pace of growth and inflation. All the major indicies were sharply higher just before the Fed announcement.
The Fed reduced its 2019 median forecast for interest rates to 2.9% from a previous estimate of 3.1%, hinting at two rates hikes in 2019. That’s below the three rate hikes previously indicated in the Fed’s September projections.
In the aftermath of the Fed statement, analysts said they the Fed’s projections on a range of measures, including economic growth, inflation and unemployment, were not as dovish as expected.
“The accompanying (Fed) materials were somewhat surprising and on net not nearly as dovish as we had expected,” Morgan Stanley (NYSE:MS) said in a note to clients.
But Morgan Stanley added that with the target range for the federal funds rate now within the range of estimates of the neutral policy rate, the Fed “must tread more carefully as it contemplates further rate hikes.”
Selling was exacerbated by a slump in tech, led by plunge of 7% in Facebook (NASDAQ:FB) following reports D.C. attorney general Karl Racine filed a claim against the social media company for farming out its user’s data to Cambridge Analytica.
A fall in semis also weighed on the tech as investors punished Micron Technology (NASDAQ:MU) in the wake of chipmaker’s mixed quarterly results and dour guidance on revenue.
Micron forecasted revenue for the February quarter in the range of $5.7 billion to $6.3 billion and EPS of $1.65 to $1.85, below a consensus of $7.26 billion and $2.39, respectively. Its shares fell 8%.
Energy stocks remained on the back foot even as U.S. oil prices clawed back some of their losses from Tuesday, despite data from the Energy Information Administration showing a smaller-than-expected draw in crude supplies.
Transports, meanwhile, were roiled by a 12% slump in FedEx (NYSE:FDX) as it slashed its outlook on earnings, citing a slowdown in global trade amid the U.S.-China trade dispute.
On the corporate news front, Allergan (NYSE:AGN) fell 7% after it halted sales and recalled remaining supplies of some of its breast implant products in Europe. The move comes after French regulators requested that the company’s breast implant products be pulled off the market after their clearance lapsed.
Citigroup said, however, the plunge in Allergan stock was an overreaction as breast implant products in Europe represent just $60 million in annual sales, less than 1% of total revenues of $15.7 billion in 2018.
Top S&P 500 Gainers and Losers Today:
General Electric (NYSE:GE), General Mills (NYSE:GIS) and AIG (NYSE:AIG) were among the top S&P 500 gainers for the session.
FedEx (NYSE:FDX), Micron Technology (NASDAQ:MU) and Facebook (NASDAQ:FB) were among the worst S&P 500 performers of the session.