Wall Street stocks finished moderately lower Wednesday after the Federal Reserve raised interest rates and projected a more aggressive pace of additional hikes amid a strengthening economy.
The announcement -- described by several analysts as somewhat hawkish -- initially boosted the dollar. However, the US currency later retreated ahead of announcements from the European Central Bank on Thursday and the Bank of Japan on Friday.
Major European bourses finished flat or moderately higher, while Asian markets were mixed.
In addition to lifting benchmark interest rates to a range of 1.75-2.0 percent, which was expected, the Fed released interest rate projections that implied two more rate hikes instead of one in 2018 and four rate hikes in 2019 instead of three.
The Federal Open Market Committee statement stressed that rising interest rates were unlikely to derail economic growth, which the committee now characterized as "strong" rather than "moderate."
Although he acknowledged concern among businesses nationwide about the uncertainty created by President Donald Trump's abrasive trade policies, Fed Chairman Jerome Powell stressed during a news conference that "the US economy is in great shape."
Powell also downplayed concerns about accelerating inflation, saying the central bank would not overreact to an expected uptick driven by the recent increase in oil prices and would aim for the rate to hold at around two percent for a "sustained" period.
"We know inflation is going to bounce around," he told reporters. "We didn't overreact, I think, to inflation being under two percent. We won't overreact to it being over two percent."
JJ Kinahan, chief market strategist TD Ameritrade, noted that oil prices had retreated somewhat from their levels in mid-to-late May, giving the US central bank more breathing room on inflation.
- Renewed trade war fears -
At roughly the same time as the Fed announcement, the Wall Street Journal reported that the Trump administration intended to proceed with a plan to impose tariffs on tens of billions of dollars of Chinese goods, a move expected to prompt retaliatory measures from China.
Boeing and Caterpillar, two blue-chip companies with significant operations in China, both lost around two percent.
Art Hogan, chief market strategist at Wunderlich Securities, described the Fed's decision as "moderately hawkish" but said it was not much different than expected. He said Boeing's drop reflected trade-war fears.
"Right now, the stock market is as much about trade policy as it is about monetary policy," Hogan said.
The timing of the trade story with the Fed news "muddied the waters" as far as determining what led to the weakening in US stocks at the end of the session, said a note from Briefing.com.
Media stocks were among the biggest movers following a US judicial decision that cleared the way for the $85 billion merger of wireless and broadband giant AT&T with media-entertainment conglomerate Time Warner.
Time Warner rose 1.8 percent, while AT&T dropped 6.2 percent.
Hong Kong's main index dropped 1.2 percent with shares in Chinese telecoms equipment maker ZTE collapsing more than 40 percent as it resumed trading after agreeing to pay a massive fine over its handling of a US sanctions violation.
The firm suspended trading in April after Washington said it had banned American companies from selling crucial hardware and software components to it for seven years.
- Key figures around 2100 GMT -
New York - Dow Jones: DOWN 0.5 percent at 25,201.20 (close)
New York - S&P 500: DOWN 0.4 percent at 2,775.63 (close)
New York - Nasdaq: DOWN 0.1 percent at 7,695.70 (close)
London - FTSE 100: FLAT at 7,703.71 (close)
Paris - CAC 40: FLAT at 5,452.73 (close)
Frankfurt - DAX 30: UP 0.4 percent at 12,890.58 (close)
EURO STOXX 50: UP 0.2 percent at 3,483.07 (close)
Tokyo - Nikkei 225: UP 0.4 percent at 22,966.38 (close)
Hong Kong - Hang Seng: DOWN 1.2 percent at 30,725.15 (close)
Shanghai - Composite: DOWN 1.0 percent at 3,049.80 (close)
Euro/dollar: UP at $1.1786 from $1.1745 at 2100 GMT
Pound/dollar: DOWN at $1.3367 from $1.3372
Dollar/yen: FLAT at 110.37 yen
Oil - Brent Crude: UP $1.06 at $76.74 per barrel
Oil - West Texas Intermediate: UP 28 cents at $66.64 per barrel