Stocks fall as Fed dashes hopes for a pivot to softer tightening stance

Wells Fargo's Bob Peck says FANG stocks are hit by macro events and specific issues.

Stocks fell on Thursday, building on Wednesday’s losses after the Federal Reserve delivered another three-quarter point interest rate hike, signaling that a rate cut is not imminent.

The Dow Jones Industrial Average fell 14 points. The S&P 500 and Nasdaq Composite fell 0.5% and 1%, respectively.

As traders digested the latest rate decision, yields rose, putting pressure on equities. The 2-year Treasury yield hit its highest level since July 2007 while the 10-year Treasury yield fell 8 basis points to 4.141%.

“The post-Fed tightening continues to put pressure on US stocks as the impact of the first round of hikes is finally being felt,” said Oanda senior market analyst Ed Moya. “Stocks won’t die a painful death here, but they will soften until markets price in a slightly more dovish Fed.”

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Traders had anticipated a 0.75 percent rate hike by the central bank and initially read the Fed statement as dovish, suggesting smaller hikes in the future.

It initially pushed stocks higher on Wednesday, but those gains were reversed when Fed Chairman Jerome Powell said it was “too soon” to discuss a rate hike and the so-called “terminal rate,” or level. where peak rates increase. likely to be higher than the Fed previously said.

“We still have some way to go and data available since our last meeting suggests that the final level of interest rates will be higher than previously expected,” he said.

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The Dow Jones Industrial Average ended Wednesday’s trading session 505 points lower, or 1.6%. The S&P 500 fell 2.5%, and the Nasdaq Composite fell 3.4%.

Many expect the market to continue until it becomes clear that inflation has cooled and the Fed will stop hiking.

Investors’ attention also turned to non-farm payrolls for October, which will be released on Friday. A good number of jobs and a low unemployment rate, while good for the economy, could signal more work ahead for the Fed. Another indicator on inflation and the economy will come from the consumer price index report for October.

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Corporate earnings season continued, with Qualcomm, Roku and Fortinet all hit hard on disappointing quarterly results and forward guidance. PelotonBoksa’s fell after reporting a wider-than-expected loss, while Moderna downplayed the prospect of Covid vaccine sales.

For the week, all major indexes are on pace for losses, with the Dow down more than 2%. The S&P and Nasdaq are down 3.9% and 5.8%, respectively, year to date.

Correction: An earlier version misstated the decline in Wednesday’s session.


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