US stocks drop as Fed sees faster rate hikes in 2017

Stock markets never appreciate policy tightening and today it is no different. The major US indices dropped on steeper Fed rate hike path in 2017.

At the time of writing, the Dow index was down 60 points or 0.30% at 19,851 levels. S&P 500 was down 9 points or 0.40%, while the Nasdaq was down 0.30% or 16 points.

Fed’s 25 basis point rate hike was largely priced-in, however, what rattled markets is the dot plot chart, which now suggests a potential for three rate hikes in 2017 as opposed to the previous forecast of two rate hikes.

Furthermore, the central bank sees little scope for further improvement in the labor market and assured markets that the inflation is moving closer to its 2% inflation target.