US stocks gave up gains on Wednesday and went into the red as the Federal Reserve spent another outrageous rate hike in its battle against persistent inflation.
The US central bank raised its key rate by 0.75% for the third consecutive time, pushing the federal funds rate to a new range of 3.0% to 3.25% – the highest level since 2008 – from a current range between 2.25% and 2.5%.
The benchmark S&P 500 fell 0.3%, while the Dow Jones Industrial Average plunged 90 points, or 0.3%. The tech-heavy Nasdaq Composite lost 0.7%.
Wednesday’s moves come after all three major averages fell about 1% in the previous session and the VIX – Wall Street’s volatility gauge – rose 5.4% to 27.16.
Bond market activity was closely monitored throughout the week. Treasury yields continued their dangerous climb Wednesday morning, with the yield-sensitive 2-year Treasury bond crossing 4% for the first time since 2007. The US 10-year benchmark remained above 3.5%, its highest level since 2011.
Among the market movers early Wednesday was General Mills (GIS), which rose nearly 4% on opening after the company reported better-than-expected quarterly results and raised its full-year sales outlook as it benefits from higher prices for breakfast cereals, snack bars and pet foods.
Beyond Meat (BYND) shares gained more than 2% after announcing a partnership with Taco Bell (YUM) for their first menu collaboration: Beyond Carne Asada Steak. The news helped BYND bounce back from a pre-market drop of nearly 3% after the meat substitute producer suspended Chief Operating Officer Doug Ramsey over his arrest for allegedly biting a man in the nose during a traffic accident this weekend.
Stitch Fix (SFIX) shares fell nearly 5% after the company reported disappointing fourth-quarter revenue expectations and sales guidance and reported a decline in the number of active customers.
Federal Reserve officials are set to raise 75 basis points from their key rates at 2 p.m. ET on Wednesday for the third time in a row. at the end of policy-making discussions.
Market participants will also listen to comments from Fed Chair Jerome Powell after the meeting, along with economic projections from members of the US central bank and the latest dot plot featuring each official’s prediction for the Fed’s short-term interest rates.
“The meeting-by-meeting and data-dependent approach adopted by central banks around the world will ease the pace of monetary policy tightening somewhat in the coming months, but central bankers have warned that such action would only take place if, and when, there is compelling evidence that inflation is cooling,” EY Parthenon Chief Economist Gregory Daco said in a note.
Across the Atlantic, Russian President Vladimir Putin announced a “partial mobilization” of Ukraine and vowed to annex the occupied territories. In a televised report, he called the steps “urgent, necessary steps to defend Russia’s sovereignty, security and territorial integrity”.
The threat of an escalation in Russia’s war against Ukraine sent markets on edge. Oil prices rose, with West Texas Intermediate (WTI) crude prices rising 2.5% to $86.07 a barrel and Brent crude rising 2.4% to $92.81 a barrel. The dollar rose to a new record high as the euro slid. In crypto markets, bitcoin (BTC-USD) fell back below $19,000.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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