The Federal Reserve today left interest rates unchanged, with the federal funds rate at 1.75%, but warned that the U.S. economy is leaning more toward weakness than inflation.
"The odds are, before the year is out, I think the Fed will do something," said James W. Paulsen, CIO at Wells Capital Management.
However, officials at the $134 million Navy-Marine Corps Society Relief Fund, Arlington, Va., estimate the economy will grow at 2.5% after inflation in the third quarter and 3% in the fourth quarter, and "we don't think it is going to be low enough to merit the Fed easing," said James L. Koltes, chairman of the asset allocation committee.
Stocks responded with a sharp drop. The Dow Jones industrial average closed down 206.5, or 2.38%, at 8,482.39; the S&P 500 fell 19.57, or 2.17%, ending at 884.23; and the Nasdaq composite closed down 37.57, or 2.87%, at 1,269.27. All numbers are preliminary.