Stocks skid to 15-month low after Fed raises rates again

Stocks gave up a big rally and took a dive in afternoon trading Wednesday after the Federal Reserve raised interest rates again and said it plans to keep raising them next year. The market finished at its lowest level since September 2017.

The U.S. central bank said it expects to increase interest rates at a slightly slower pace next year, and also said it isn't planning any changes in the gradual shrinking of its large bond portfolio. Investors appeared to hope the Fed would unveil a sharper slowdown in interest rate hikes and other credit tightening policies because economic growth is likely to slow down.

The Dow Jones Industrial Average  fell 513 points at its lowest point and closed down 351. Before the Fed's decision was announced at 2 p.m. Eastern Time, it was up 381 points.

Bond prices rose following the Fed's announcement. The yield on the 10-year Treasury note fell to 2.78 percent from 2.84 percent immediately before the Fed's announcement and 2.82 late Tuesday. That's a substantial move for that benchmark lending rate.

The yo-yo movements for the stock market were a result of markets trying to parse Powell's comments, which essentially were: The economy is strong enough to warrant a rate increase now, but not so strong to need three rate increases in 2019,  as the Fed had indicated a few months ago.

"Chairman Powell was threading the needle today," said Frances Donald, head of macroeconomic strategy at Manulife Asset Management. "He had to say that the economic picture is not as good as three months ago, while also saying that the pillars of the economy remain intact. And markets have to react, live, to that 'on the one hand, on the other hand' that Powell has to play in this economy."

The Dow fell 1.5 percent to 23,323.66. The S&P 500 skidded 1.5 percent to 2,506.96. It's tumbled 14.5 percent in the last three months, including a loss of 9.2 percent so far in December.

The Nasdaq composite gave up 2.2 percent, to finish at 6,636.83. The Russell 2000 index, which has suffered broader declines than the rest of the market, fell 2 percent to 1,349.23.