Stocks finished mixed on Thursday with high-growth tech shares posting solid gains after the Federal Reserve indicated it would tighten monetary policy earlier than previously expected.
The Dow Jones Industrial Average fell 210 points, or 0.62%, to 33,823 and the S&P 500 slipped 0.04%
The yield on the benchmark 10-year Treasury note fell Thursday to 1.487%.
The Federal Reserve left interest rates unchanged on Wednesday but signaled it expected to boost interest rates two times by the end of 2023, earlier than Wall Street had anticipated. Stocks finished lower Wednesday.
Investors were caught off guard by Fed Chairman Jerome Powell's confirmation that the central bank has begun discussing trimming bond purchases.
And while the Fed maintained its stance that inflation spikes would be "transitory," it did upwardly revise its outlook for inflation. That move came as vaccine rollouts have spurred job growth and price pressures are expected to rise between now and the end of the year.
"Clearly expectations for the Fed to flinch were grossly overblown - a unanimous vote clearly shows they’re all on the same page with the current state of the economy, and importantly they’ve essentially doubled down on their view that inflation is transitory, albeit at a higher rate than last time they met," said Mike Loewengart, managing director of investment strategy at E-Trade.
"But what happens next year becomes more of a question mark, and the market may be reacting to the change in the dot plot that now shows more officials indicating a rate hike is coming in 2022," he added.
The number of Fed governors who expect rate hikes as early as 2022 - known as the dot plot - went to seven from four, essentially translating into two rate hikes in 2023 based on growth and inflation projections from the 18 members of the Federal Open Markets Committee.
Ford (F) - Get Report shares finished down 1.7% on Thursday after the carmaker said its second-quarter earnings would exceed forecasts even as it cautioned on the uncertainty linked to a global shortage in semiconductor supplies.
CureVac (CVAC) - Get Report shares tumbled 39% Thursday after the company said a late-stage study of its COVID-19 vaccine candidate “did not meet prespecified statistical success criteria."