Jan. 26 (UPI) — The Dow Jones Industrial Average gave up gains and closed in negative territory Wednesday as Federal Reserve Chairman Jerome Powell suggested interest rate hikes were on the horizon.
The blue-chip index closed the day down 129.64 points, or 0.38% after it was up more than 500 points earlier in the day. The S&P 500 fell 0.14% and the Nasdaq Composite closed the day up 0.021%.
At the conclusion of its two-day policy meeting, the Federal Open Market Committee elected to keep interest rates at 0% to 0.25%, the same level since March 2020 but warned an increase could be coming soon.
The news was expected and stocks remained higher in the minutes leading up to the meeting with the Nasdaq up 2.5%, the S&P up 1.5% and the Dow up nearly 1%.
However, the Dow began to turn for the worse as Powell said in a press conference that there was “quite a bit of room” to raise rates before it would negatively impact the labor market and that prices could continue to remain high as “inflation risks are still to the upside.”
Following Powell’s comments, the 10-year treasury yield rose above 1.8% as investors believed the central bank may tighten its monetary policy more aggressively.
“After hearing Fed Chair Powell talk, it became clear the risk of more rate hikes was elevated and the earlier Wall Street rally fizzled,” OANDA’s Edward Moya said in a note.
Shares of Microsoft rose 2.85% on the heels of a better-than-expected earnings report after the bell Tuesday, helping to buoy the Nasdaq.
Meanwhile, Boeing stock fell 4.77% after the aircraft manufacturer reported that it took a $3.5 billion pre-tax charge on its 787 Dreamliner program.
Amid a volatile week of trading, all three major indexes are negative for the month of January with the Nasdaq in correction territory, more than 17% off from its intraday high and down 13% for the month. The S&P 500 is down more than 8% for January and nearly 10% from its high.