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Dow falls 151 points as investors anticipate Fed interest rate hike

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Dow falls 151 points as investors anticipate Fed interest rate hike
The Dow Jones Industrial Average dropped 151 points on Tuesday as investors looked ahead to the conclusion of the Federal Reserve's policy meeting Wednesday. File Photo by John Angelillo/UPI | License Photo

June 14 (UPI) -- U.S. markets declined Tuesday as investors anticipate a larger-than-average rate hike from the Federal Reserve.

The Dow Jones Industrial Average dropped 151.91 points, or 0.5%, while the S&P 500 slid 0.38%, declining for the fifth straight session. The tech-heavy Nasdaq Composite eked out a 0.18% gain.

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Stocks hit session lows in the final hour of trading in a volatile session that saw the Dow rise as much as 170 points at its high and 370 points at session lows.

Markets are awaiting the conclusion of the Federal Reserve's policy meeting on Wednesday, which reports indicate could see the central bank raise interest rates by 75 basis points for the first time since 1994.

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"The Fed's previous plan to hike by 50 basis points at the meetings in June and July and then revert to 25 basis point increases in the fall was always dependent on inflation showing signs of cooling," Paul Ashworth, chief North America economist at Capital Economics, wrote in a note Tuesday.

"Instead, the monthly gains in core CPI accelerated back to 0.6% in both April and May, suggesting that price pressures are broadening," Ashworth wrote.

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The 10-year treasury rate climbed above 3.45% reaching a new 11-year high, amid the concern that the Fed would more aggressively tighten policies.

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The Labor Department's Producer Price Index also showed Tuesday that prices for U.S. producers rose by almost 11% last month, compared to May 2021.

Shares of Coca-Cola fell 3.49%, Procter and Gamble dropped 3.16% and United Health declined 1.77% to drag down the Dow.

Travel stocks also declined for the second straight day with Royal Caribbean falling 4.38%, Norwegian Cruise Line declining 3.72% and Delta dropping 2.58%.

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Tech stocks experienced a brief rally with Tesla climbing 2.39%, Nvidia rising 1.21% and Microsoft gaining 0.92% to bring the Nasdaq higher, while shares of Oracle rose 10.41% after posting an earnings beat, while citing a "major increase in demand" in its infrastructure cloud business.

FedEx stock also rose 14.41% for its best day since 1986 after announcing it would increase its quarterly dividend by more than 50% while adding three new directors to its board.

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