By Caroline Valetkevitch
NEW YORK (Reuters) – U.S. stocks ended down sharply on Wednesday after U.S. Federal Reserve meeting minutes signaled the central bank may have to raise interest rates sooner than expected.
The S&P 500 and Nasdaq quickly extended their declines after the minutes which investors viewed as more hawkish than they had feared. The Dow, which hit a record high earlier in the day, reversed course and also closed lower.
The minutes from the Fed’s Dec. 14-15 policy meeting offered more details on the central bank’s shift last month toward a tighter monetary policy to curb inflation. Policymakers said last month that the U.S. labor market was “very tight.”
“This is more hawkish than expected. This shift towards hawkishness could be problematic for both stock and bond markets,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
The S&P 500 technology sector was the biggest drag on the S&P 500, while rate-sensitive real estate sector led declines among sectors.
According to preliminary data, the S&P 500 lost 92.86 points, or 1.94%, to end at 4,700.49 points, while the Nasdaq Composite lost 524.89 points, or 3.36%, to 15,097.83. The Dow Jones Industrial Average fell 387.47 points, or 1.05%, to 36,412.18.
Rising interest rates increase borrowing costs for businesses and consumers. Higher rates can depress stock multiples, especially for technology and other growth stocks.
The S&P 500 financials index also ended lower, a day after it registered an all-time closing high.
Policymakers had agreed to hasten the end of their pandemic-era program of bond purchases, and issued forecasts anticipating three quarter-percentage-point rate increases during 2022.
(Additional reporting by Stephen Culp in New York and Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)