GLOBAL MARKETS-Stocks gyrate, dollar gains as Fed keeps hawkish stance

US stocks rose, then fell, while Treasury yields rose then fell as markets reacted wildly to a gloomy economic picture over the next year after the Federal Reserve maintained a tough stance on fighting inflation by raising interest rates. The three major stock indexes oscillated, the yield on the benchmark 10-year Treasury rose to 3.6401% and the dollar surged to a fresh two-decade high after the Fed hiked rates by 75 basis points as expected.

The Fed also said in a statement after a two-day meeting of policymakers that it expects its benchmark rates to rise to 4.4% by year-end and 4.6% by the end of 2023. 2% will take years and goes along higher unemployment and slower growth, according to forecasts by policymakers who question prospects for a so-called “soft landing”.

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Forecasts show that Americans are in for some pain as the Federal Reserve works to end inflation and prevent Fed Chair Jerome Powell from otherwise having even worse results. “The Fed has scaled back expectations to quell counterproductive speculation about a pivot by market participants for the time being,” said Johan Grahn, head of ETFs at Allianz Investment Management LLC in Minneapolis.

“It’s a logical move by a ‘Volcker-bold’ Fed, but one that they can roll back at a later date if need be,” Grahn said, referring to former Fed Chair Paul Volcker, who pushed double-digit inflation four decades ago had tamed trigger a recession. Wall Street stocks made several unsuccessful attempts to recover.

“Perhaps the stock market was a little optimistic that they could tone down the language,” Ellen Hazen, chief markets strategist at FLPutnam Investment Management in Wellesley, Massachusetts, said of the Fed’s statement. “Often you see (the market) doing one thing one day and something else the next day. Investors might want to reserve judgment until tomorrow.”

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The Dow Jones Industrial Average fell 1.06%, the S&P 500 fell 1.01% and the Nasdaq Composite fell 1%. After an initial reaction, markets largely shrugged off Russian President Vladimir Putin, who accused the West of “nuclear blackmail,” statements that prompted a flight to safe haven assets such as gold and bonds.

The pan-regional STOXX 600 index in Europe closed down 0.90%, having previously fallen to its lowest level since early July, when Putin announced military mobilization. The MSCI stock index fell 1.12% globally. The 10-year government bond yield was last down 4.7 basis points to 3.526%.

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The dollar index rose 0.853% while the euro fell 1.09% to $0.9861. The Japanese yen weakened 0.04% against the greenback to 143.78 per dollar. Oil prices fell after the Fed hiked rates to curb inflation as it could also hurt economic activity.

Brent crude futures were down 79 cents at $89.83 a barrel, its lowest close in two weeks, while US West Texas Intermediate (WTI) crude fell $1.00 to $82.94, its lowest close in since September 7th. Spot gold rose 0.7% to $1,674.69 an ounce.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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