The Dow fell 280 points after the Fed holds rates steady, but hints more rate hikes to come
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Key Takeaways
- The Dow fell 0.8% Wednesday, weighed on by a more than 6% drop in UnitedHealth Group, the index’s most heavily weighted component.
- Disney shares fell after the entertainment giant delayed the release of Avatar, Star Wars, and Marvel films.
- Nike was the best-performing stock in the index, rising nearly 6%.
The Dow Jones Industrial Average (DJIA) dropped 0.8%, or 278 points, after the Federal Reserve signaled more interest rate hikes to come later this year.
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The S&P 500 and Nasdaq Composite joined the Dow in negative territory immediately after the Fed minutes showed most officials favor raising rates one or two more times this year after choosing to pause at today’s meeting. Though the two other indexes rebounded from their midday selloff to finish the day in the green.
The Dow’s underperformance can be partly attributed to the fact that the Dow Jones Industrial Average is a price-weighted index, giving higher-priced stocks more influence over the index movements. That’s why UnitedHealth Group’s (UNH) 7% plunge dragged down the Dow. UnitedHealth Group is more than $100 more expensive than Goldman Sachs, the Dow’s next-most expensive stock. In contrast, the Nasdaq and S&P 500 are capitalization-weighted, where the index’s most-valuable companies have the most impact on price movement.
UnitedHealth Group fell on reports that seniors are getting surgeries that were postponed during the pandemic, forcing the insurer to increase its cost projections to the high end of previous estimates. The healthcare sector was the day’s worst performer, with drugstore chain Walgreens Boots Alliance (WBA) falling 1.4%.
Boeing (BA) shares fell 1.6% after a report that it increased its deliveries in May, but still trailed rival Airbus as production delays on both the 737 Max and 787 Dreamliner have slowed the aircraft maker’s deliveries.
Walt Disney (DIS) shares were down 1.5% after it delayed upcoming Avatars, Star Wars, and Marvel films.
Nike (NKE) was the best-performing Dow stock, rising 5.7% after it featured NBA Champion Nikola Jokic in a new advertisement.
Consumer staple stocks advanced, with Walmart (WMT) up 1%, Procter & Gamble (PG) rising 0.9%, and Coca-Cola (KO) shares moving up 0.7%.
Intel (INTC) shares were higher by 4.9% after a U.S. patent tribunal sided with the chipmaker in a $2.2 billion patent case. Technology was another sector that moved higher, with Microsoft (MSFT) up 0.9%, Apple (AAPL) up 0.4%, and Cisco Systems (CSCO) moving up 0.3%.