US stocks ended a volatile session lower while Treasury yields were up Wednesday as the US Federal Reserve delivered a three-quarters of a percentage point interest rate hike and Fed Chairman Jerome Powell said it was too soon to speculate over a pause in rate hikes.
The Dow Jones Industrial Average fell 505.44 points or 1.55% to 32,147.76, the S&P 500 lost 96.41 points or 2.50% to 3,759.69 and the Nasdaq Composite dropped 366.05 points or 3.36% to 10,524.80.
The MSCI’s gauge of stocks across the globe shed 1.72%. The greenback was down against the Japanese yen but well off its earlier lows.
Stocks initially jumped and yields extended declines after the US central bank announced the rate hike as expected and signalled that future increases in borrowing costs could be made in smaller steps.
But markets sharply reversed course after Powell – in remarks during a news conference after the announcement – said “it is very premature to be thinking about pausing” on the effort to lift the federal funds target rate.
“The (stock) market’s response was positive until the press conference,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
Powell “didn’t waver in his commitment towards restoring price stability, and obviously the market was not pleased with that,” she said.
The Fed has been aggressively raising rates in order to bring down inflation with investors speculating over when it could get less aggressive in its tightening cycle.
After their initial decline, benchmark 10-year notes last were up 3.2 basis points (bps) to 4.084% from 4.052% late on Tuesday.US two-year yields which reflect rate expectations were up 6.6 bps at 4.603% .
In currencies, the US dollar initially fell sharply and was down more than 1% against the Japanese yen following the Fed announcement. The US dollar was last down 0.3% at 147.76 yen. The euro was down 0.55% to US$0.982.
Oil prices ended higher, climbing further after the Fed’s rate news.
Brent crude settled up US$1.51 or 1.6% to US$96.16 while US West Texas Intermediate crude settled up US$1.63 or 1.8% to US$90. – Nov 3, 2022
