Firm Fed Hammers the Stock Market

Updated from 2:39 p.m. EDT

Stocks fell sharply Thursday after the Federal Open Market Committee said nothing in an afternoon policy statement to suggest it is nearing the end of its rate-hike campaign.

The Dow Jones Industrial Average finished down 99.51 points, or 0.96%, to 10,274.97. The average was down about 6 points before the Fed's rate decision hit. Meanwhile, the S&P 500 fell 8.52 points, or 0.71%, to 1191.33, while the Nasdaq lost 11.93 points, or 0.58%, to 2056.96.

Trading volume on the New York Stock Exchange was 1.62 billion shares, with decliners narrowly beating advancers by a 6-to-5 margin. Volume on the Nasdaq was 1.72 billion shares, with decliners outpacing advancers 9 to 7.

In other markets, the 10-year Treasury bond rose 16/32 in price to yield 3.92%, while the dollar rose against the yen and fell against the euro.

As was widely expected, the Federal Reserve's policymaking committee raised its target for the fed funds rate by 25 basis points to 3.25%, its ninth consecutive hike. FOMC members also retained their commitment to carry out future rate hikes at a "measured" pace, disappointing investors who wanted hints the tightening cycle will soon end.

"If that were the case, it would have cleared the way for the market to finally and fully digest all of the past nine rate hikes and move forward," said Robert Pavlik, portfolio manager with Oaktree Asset Management. "Now, we have to continue to work around these interest rate hurdles that the Fed keeps throwing at us every time they meet."

If anything, the FOMC statement was more hawkish than when the panel met in May.

"Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually," the Fed's statement said. "Pressures on inflation have stayed elevated, but longer-term inflation expectations remain well-contained."

"Obviously it's referring to higher energy prices," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "They didn't drop the measured pace terminology and will continue to raise rates."

"On inflation, the pressures that were said to have picked up in the May statement have now remained elevated," said Ian Shepherdson, chief economist with High Frequency Economics. "In short, there's nothing here to hint that the rate hikes might stop soon; if anything, the hint is the other way."