On Wednesday, the stock market experienced a downturn as investors processed the Federal Reserve’s decision to maintain current interest rates. However, the central bank hinted at the likelihood of one more rate hike occurring during the final two meetings of 2023 and suggested that interest rates could remain elevated for an extended period.
The Dow Jones Industrial Average (^DJI) concluded the day with a 0.2% decline. The S&P 500 (^GSPC) experienced a more significant drop of nearly 1%, while the Nasdaq Composite (^IXIC), which is heavily weighted towards technology stocks, fell by almost 1.5%.
Market attention on Wall Street quickly shifted towards contemplating what the future holds regarding interest rates. Investors wondered if the Fed would continue to raise borrowing costs this year and when the possibility of a rate cut might enter the picture.
The central bank’s communication indicated that another rate hike is expected before the year’s end, and it adjusted its outlook for the benchmark interest rate, suggesting that interest rates will remain elevated for a longer duration compared to previous expectations.
The recent surge in oil prices, which some consider a threat to the Fed’s efforts to control inflation, experienced a slight pullback on Wednesday. Investors assessed how the Fed’s policy decisions might impact economic growth and fuel demand in this context.
In a separate development signaling the revival of the US IPO market, Klaviyo (KVYO) made its market debut on Wednesday, following the recent IPOs of Arm (ARM) and Instacart (CART). Klaviyo, a marketing automation company, priced its initial public offering above the expected range at $30 per share, resulting in a valuation of $9.2 billion.
Meanwhile, unexpected deceleration in UK inflation raised the likelihood that the Bank of England would pause its interest rate increases after one last hike scheduled for Thursday. The British pound depreciated in response to the August inflation report.
