US stocks closed mixed after the Federal Reserve signaled more interest rate hikes to come

  • The Fed keeps interest rates steady, and points to more hikes by the end of the year
  • UnitedHealth sinks after cost warning, hospitals rally
  • Tesla ends its 13-session winning streak
  • Indices Close: S&P 500 +0.08%, Nasdaq +0.39%, Dow -0.68%

June 14 (Reuters) – U.S. stocks closed mixed on Wednesday after the Federal Reserve kept U.S. interest rates unchanged but indicated in a fresh economic outlook that borrowing costs are likely to rise by another half percentage point by the end of this year.

Trading was choppy and volume was heavy after the rate-setting Federal Open Market Committee (FOMC) responded to a stronger-than-expected economy and a slower decline in inflation.

The new forecasts added a hawkish slant to the Fed’s interest rate decision, showing that on average policymakers see the overnight rate rising from the current range of 5.00%-5.25% to the range of 5.50%-5.75% by the end of the year.

“Some people were expecting that the Fed would pause this month, but it also wouldn’t raise rates anymore,” said Sam Stovall, chief investment analyst at CFRA Research. “However, it appears that the FOMC members have become more hawkish since the last meeting, and I think that has caught investors by surprise.”

Earlier on Wednesday, a larger-than-expected decline in US producer prices in May due to lower costs of energy and food commodities indicated that inflation is slowing. The data the previous day showed that consumer prices were moderate last month.

Traders now see a 63% chance that the central bank will raise interest rates in July, up from 60% earlier on Wednesday, according to CME Fedwatch tool.

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Shares of Tesla Inc fell 0.74%, snapping the electric car maker’s 13-session winning streak, its longest ever. More than $43 billion worth of Tesla stock has been traded, more than any other stock in the S&P 500.

Nvidia (NVDA.O) and Broadcom (AVGO.) rose in 2023 to 48%.

Trading volume on US stock exchanges was strong, with 12.1 billion shares changed hands, compared to an average of 10.7 billion shares over the previous 20 sessions.

The S&P 500 index jumped 0.08%, ending the session at 4,372.59 points.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 5, 2023. REUTERS/Brendan McDiarmid

The Nasdaq rose 0.39% to 13,626.48 points, while the Dow Jones Industrial Average fell 0.68%, to 33,979.33 points.

Dow weighing UnitedHealth Group (UN.N) fell 6.4% after the health insurer warned medical costs would rise in the second quarter as more seniors undergo non-urgent procedures they have delayed during the pandemic.

The S&P 500 Healthcare Index (.SPXHC) fell 1.1% and the S&P 500 Healthcare Managed Index (.SPLRCHMO) fell 6.9% to close at its lowest level in a year.

However, shares of hospital operator Universal Health Services (UHS.N) jumped 3.7% and shares of HCA Healthcare Inc (HCA.N) rose 1.6%.

Advanced Micro Devices (AMD.O) gained more than 2% after Reuters reported that Amazon’s (AMZN.O) cloud computing unit may use its new AI chips.

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

The S&P 500 is up about 14% so far in 2023, while the Nasdaq is up about 30%.

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While tech giant stocks have led much of the gains this year, economically sensitive small stocks as well as the materials and banking sectors have recently joined the rally.

Declines outnumbered gainers in the S&P 500 (.AD.SPX) by 1.3 to one.

S&P 500 posted 40 new highs and 2 new lows; The Nasdaq Index posted 90 new highs and 69 new lows.

Additional reporting by Shristi Ashar and Sruthi Shankar in Bengaluru and Noel Randewich in Oakland, California. Editing by Vinay Dwivedi and David Gregorio

Our standards: Thomson Reuters Trust Principles.

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