As was expected, the Federal Reserve yesterday raised its benchmark federal-funds rate by a quarter percentage point to between 1.25 percent and 1.5 percent—its fourth increase in a year. Senior officials also stuck to their earlier projections of three rate increases in 2018.
The S&P 500 fell slightly, by less than 0.1 percent, putting an end to a four-day rise in the benchmark index. Financial stocks were the big losers of the day, with the sector slumping 1.3 percent. Only two of the 67 components of the Financial Select Sector SPDR ETF ended in positive territory, according to FactSet data.
Why did this happen, when the financial sector tends to outperform in periods of higher interest rates? Because the rate hike was such a non-surprise. The financial sector had already risen in anticipation of the Fed meeting, increasing by 6.7 percent over the past month.
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