S&P 500 Suffers Worst Fed Rate-Decision Day Since 2011

(Bloomberg) -- The Federal Reserve tightened and U.S. stocks tumbled. How bad was it? You’d have to go back more than seven years to find a worse reaction on a rate-decision day.

The S&P 500 fell 1.5 percent to the lowest close in 15 months after Fed Chairman Jerome Powell downplayed the recent turbulence in the financial market and said the central bank doesn’t plan to alter efforts to reduce its balance sheet. The slump was the worst for any Fed decision since September 2011.

“The market is disappointed,” Jeffrey Rosenberg, chief fixed income strategist for BlackRock Financial Management, said on Bloomberg Television. “The market was looking for a more flexible Fed, a we-feel-your-pain Fed and he didn’t give any of that.”

Stocks erased gains that sent the S&P 500 up as much as 1.5 percent earlier, extending losses from its 2018 peak to almost 15 percent. The Fed raised borrowing costs for the fourth time this year, defying pressure from President Donald Trump, while dialing back projections for interest rates and economic growth in 2019.

The last time stocks took a Fed rate decision this badly was in September 2011, when the central bank announced plans to be $400 billion of long-term debt to combat risks to the economy one month after Standard & Poor’s downgraded the U.S. sovereign debt rating.

The hike marked only the third time since 1980 that tightening occurred when the S&P 500 is down over the last three, six and 12 months.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Jeremy Herron

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