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Stocks meander lower

NEW YORK — After a jittery afternoon of trading, major U.S. stock indexes fell Wednesday while smaller companies fared better. The Federal Reserve raised interest rates, as investors expected, and said it could raise rates at a quicker pace next year.

Stocks traded higher early in the day and jumped after the Fed announced its decision. The Dow Jones industrial average climbed 250 points, but gave it all up as new Fed Chairman Jerome Powell addressed reporters. At the end of trading, it wobbled and ended lower. The dollar weakened and bond yields turned lower. Yields had risen earlier in the afternoon.

The Fed said the U.S. economy and the job market continued to improve over the last two months. It still expects to raise interest rates three times this year, and said it might raise rates three more times this year instead of two.

Brent Schutte, the chief investment strategist for Northwestern Mutual Wealth Management, said Powell is trying to tell Wall Street what the Fed’s plans are without worrying investors too much. He said stocks dropped after Powell said rates might rise higher than the Fed expects.

“The market will have to get to know Jerome Powell a little bit and will have to test his credibility as Fed chairman,” he said. “I would imagine the bar is higher for him in the shorter term because he is not a trained economist,” unlike Janet Yellen and other predecessors.

Small and mid-size companies climbed. Energy companies led the way as oil prices jumped for the second day in a row. Homebuilders advanced following a report that sales of previously occupied homes increased in February. Cereal and packaged foods companies slumped after General Mills reported rising expenses and cut its annual profit forecast and airlines skidded after Southwest said its revenue is suffering as it cuts fares to compete with other companies.

The S&P 500 index slid 5.01 points, or 0.2 percent, to 2,711.93. The Dow Jones industrial average lost 44.96 points, or 0.2 percent, to 24,682.31. The Nasdaq composite fell 19.02 points, or 0.3 percent, to 7,345.29. The Russell 2000 index of smaller companies gained 8.90 points, or 0.6 percent, to 1,579.30.

Bond prices edged lower. The yield on the 10-year Treasury note declined to 2.88 percent from 2.90 percent Tuesday. It had risen as high as 2.93 percent as investors expected quicker gains in interest rates.

David Kelly, the chief global strategist for JPMorgan Asset Management, said stocks usually do well when rates are rising, but only up to a point.

“If interest rates are rising from a low level, there’s more optimism about the economy, and that generally is a more positive thing,” he said. That’s the case right now, but with an important difference: the economy has been growing for almost a decade, and interest rates have been historically low for the whole time.

Kelly added that the Fed and the government need to be careful to focus on smooth growth, as the recent tax cuts will dump some short-lived stimulus into the economy.

“The overall effect of the tax cut is to deliver another keg to a keg party at 2 a.m.,” he said. “The party is probably going to go a little longer but the hangover is going to be worse.”

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