U.S. stocks decline after Fed rate hike decision

U.S. stocks ticked down Wednesday, as the U.S. Federal Reserve decided to raise benchmark interest rate by 25 basis points, the first and only time in 2016.

The Dow Jones Industrial Average fell 118.68 points, or 0.60 percent, to 19,792.53. The S&P 500 lost 18.44 points, or 0.81 percent, to 2,253.28. The Nasdaq Composite Index dipped 27.16 points, or 0.50 percent, to 5,436.67.

In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent, said the Fed in a statement after concluding a two-day policy meeting.

"The moderate economic expansion, continued strengthening of labor market and the improvement in inflation condition supported the central bank to raise interest rate after nearly a one-year pause," said the statement.

Also on Wednesday, the Fed released its updated economic projections which indicated that the central bank forecasts three rate hikes next year, while in its September projections, Fed officials expected only two rate hikes in 2017.

The slight upward adjustment of forecast reflected Fed officials' consideration of the falling unemployment rate, Fed chair Janet Yellen said at a press conference following the two-day Federal Open Market Committee (FOMC) meeting.

Yellen emphasized that the central bank will factor fiscal policies, along with other things, such as global conditions and oil prices, into economic outlook and figure out appropriate monetary policy.

"It is hard to believe people did not anticipate the modest bump in the FOMC's rate forecast, but that' s the only reasonable explanation for the 6bp rise in 10-yr yields and 8bp rise in 2-yr yields after the announcement. After all, today's hike was 100% priced in and the economic forecast barely changed," said Chris Low, chief economist at FTN Financial.

On the economic front, the Producer Price Index for final demand increased 0.4 percent in November, seasonally adjusted, the U.S. Labor Department reported Wednesday.

U.S. retail and food services sales for November increased 0.1 percent from the previous month to 465.5 billion dollars, seasonally adjusted, said the Commerce Department.

The Fed posted Wednesday that U.S. industrial production declined 0.4 percent in November after edging up 0.1 percent in October. Enditem