US STOCKS-US stocks drop after Fed signals more rate hikes to come


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Fed holds rates steady, as expected


Indexes: Dow -1.18%, S&P 500 -0.68%, Nasdaq -0.83%

(Updated at 2:10 p.m. ET/1810 GMT)

By Noel Randewich and Sruthi Shankar

June 14 (Reuters) –

Wall Street stocks fell on Wednesday after the Federal Reserve kept U.S. interest rates unchanged but signaled in new economic projections that borrowing costs will likely rise by another half of a percentage point by the end of this year.

The S&P 500 reversed early gains to trade lower after the U.S. central bank


to a stronger-than-expected economy and a slower decline in inflation.

The new projections added a hawkish tilt to Wednesday’s interest rate decision, showing policymakers at the median see the benchmark overnight interest rate rising from the current 5.00%-5.25% range to a 5.50%-5.75% range by the end of the year.

“The market was pretty overbought” ahead of the Fed meeting, said Michael James, Managing Director of Equity Trading at Wedbush Securities in Los Angeles, “and any sign of hawkish commentary was going be negative. We received it and that’s the initial knee jerk reaction.”

Earlier on Wednesday, a bigger-than-expected


in U.S. producer prices in May due to a decline in the costs of energy goods and food signaled that inflation was cooling. Data a day earlier


consumer prices moderated last month.

The Dow Jones Industrial Average was down 1.18% at 33,808.66 points, while the S&P 500 lost 0.68% to 4,339.39.

The Nasdaq Composite dropped 0.83% to 13,460.86.

U.S. stocks have rallied in recent weeks, lifting the benchmark S&P 500 and Nasdaq to 14-month highs following signs of economic resilience, a better-than-expected earnings season and bets that interest rates are near their peak.

While megacap technology stocks have driven much of the gains this year, economically sensitive small-cap shares as well as material and banking sectors have joined the rally recently. (Reporting by Shristi Achar A and Sruthi Shankar in Bengaluru, and by Noel Randewich in Oakland, Calif. Editing by Vinay Dwivedi and David Gregorio)

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