Dow, S&P, Nasdaq hit with losses on fears Fed is about to raise interest rates

The Dow fell nearly 400 points and the S&P 500 and Nasdaq each lost 2.5 percent in trading Friday, bringing volatility to domestic markets that have mostly surged in recent weeks. The 394-point dip was the Dow's largest single-day loss since Great Britain announced its exit from the European Union on June 24. The losses, analysts believe, were mainly based in remarks by a Federal Reserve Bank president Friday that seemed to favor raising interest rates at the Fed's next policy meeting on Sept. 20. File Photo by John Angelillo/UPI

NEW YORK, Sept. 9 (UPI) — The Dow Jones Industrial Average, S&P 500 and Nasdaq all experienced significant losses Friday, largely over concerns that the U.S. central bank is about to raise key interest rates for the first time this year.

The Dow shed 394 points in trading Friday to finish at 18,085.45 — its worst one-day loss since Great Britain announced its departure from the European Union on June 24.

The S&P 500 lost 53 points, or 2.5 percent — the first time it finished down more than 1 percent in 52 business days — to close at 2,127.81.

The Nasdaq fell 133 points, also 2.5 percent of its value, to finish the week at 5,125.91.

Investors were clearly anticipating a rate hike by the U.S. Federal Reserve, which will meet Sept. 20 to mull the policy change. The Fed has yet to raise rates in 2016.

In recent weeks, the Fed has said a rate increase in September is possible, but far from a guarantee. The difference on Wall Street Friday, though, appeared to be rooted in remarks made by Boston Federal Reserve Bank President Eric Rosengren.

“My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy [and raise rates],” he said earlier Friday.

“If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate,” he added. “A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery.”

The Federal Open Market Committee, the panel responsible for raising benchmark rates, has met several times so far this year but each time declined to raise the federal funds rate — citing negative economic indicators, primarily the sub-2 percent U.S. inflation rate, as the reason to leave rates alone.

Fed chair Janet Yellen has said, though, that the central bank expects to raise rates at least once before the end of 2016. In December, the FOMC elevated rates for the first time since they were lowered to near zero during the financial crisis in 2009.

Rosengren’s remarks Friday indicate that he might become at least the second FOMC member to vote in favor of raising rates at this month’s meeting. Kansas City Federal Reserve Bank President Esther George has been voting to raise rates for five years.

The Federal Reserve will hold its two-day policy meeting Sept. 20-21.

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