"The Fed's acknowledgment of the quickening pace of inflation today put three hikes in 2018 into the "base-case" and perhaps raises the prospects for a fourth", said Mike Terwilliger, portfolio manager, Resource Credit Income Fund.
Rising bond yield continued to weigh on on Tuesday, pushing the Industrial Average down more than 250 points, with pressure also being piled on by a drop in health companies. Chipmaker Advanced Micro Devices added 72 cents, or 5.6 percent, to $13.59, while Electronic Arts rose $11.58, or 9.8 percent, to $130.28. Oil prices headed lower. The stock was the biggest gainer in the S&P 500, rising $8.52 to $127.23.
The Dow tumbled 363 points on Tuesday. They were pressured by a spike in Treasury bond yields ahead of a Federal Reserve policy announcement on Wednesday that could signal an acceleration in interest rate increases this year.
The S&P 500 saw a 5.6% January rise, however.
The index closed down 362.59 points at 26,076.89 in NY, with the broader S&P 500 index falling 31.10 points to 2,822.43.
The Dow Jones Industrial Average lost 362.59 points, or 1.37 percent, to 26,076.89.
"My gut sense is that the world won't end just because we reach some magic level in the bond market", Juckes wrote in a report on Tuesday. The January meeting is the last for outgoing Chairwoman Janet Yellen who will be replaced by fellow board member Jerome Powell on February 3. Insurer Aetna fell 3.02 percent and managed-care company UnitedHealth Group declined 4.35 percent. The stock was down more than any other company in the S&P 500, shedding $2.68 to $25.64.
Wall Street also observed the sovereign bondsmarket as the standard 10-year yield gave away above 2.7%.
U.S. Treasury yields surged to more than three-year highs on expectations that central banks globally will reduce stimulus as the economic outlook improves.
Factors such as an expanding USA economy, growth in corporate profits, and enthusiasm over recently enacted tax cuts and other business-friendly policies have helped to support stock buying. A rise in yields makes borrowing cash more expensive.
USA pending home sales (http://www.marketwatch.com/story/pending-home-sales-inch-higher-as-tight-inventory-stifles-housing-market-2018-01-31) rose 0.5% in December, the National Association of Realtors said Wednesday, marking the highest reading since March, even though the index stands just 0.5% higher than a year ago. This week yields have hovered at the highest level since April 2014.
MARKETS OVERSEAS: Germany's DAX fell 0.2 percent, while France's CAC 40 gained less than 0.1 percent. After six straight weekly declines, the dollar index was on track to fall about 3.4 percent for the month, which would be its biggest monthly fall since March 2016. In Asia, Tokyo's Nikkei 225 fell 0.8 percent, while Hong Kong's Hang Seng rose 0.9 percent.