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Bank stocks stumble as 10-year yield hits 15-month low following Fed lower-for-longer policy update

Mark DeCambre

Popular gauges of financial institutions on Wall Street traded solidly lower after the Federal Reserve Wednesday downgraded its forecast for U.S. economic growth and indicated that policy makers wouldn't hike rates in 2019. That reaffirmation of its earlier dovishness provides a poor environment for bank's, whose business models perform better in a rising interest-rate environment. The 10-year Treasury note fell to 2.53%, hitting its lowest level since early January of 2018, after the Fed policy update. Meanwhile, the Financial Select Sector SPDR ETF fell 0.6%, while the S&P 500's financial sector was off by 1.2% and the Invesco KBW Bank ETF was 1.8% lower in late-Wednesday action. Although the Federal Open Market Committee held interest rates at a range of 2.25% to 2.50% as expected, it downgraded its economic outlook, dropping its gross domestic product forecast to 2.1% for 2019, from 2.3% before, and said that the winding down of its balance sheet would end in September. Meanwhile, the Dow Jones Industrial Average , the Nasdaq Composite Index and the S&P 500 index all headed modestly higher after the Fed decision.