(Bloomberg) – Stocks sold off as Jerome Powell continued to be decisively belligerent as the Federal Reserve pushed through its most aggressive tightening campaign since the 1980s to stem inflation.
Most read from Bloomberg
In a volatile session, the S&P 500 fell decisively after the Fed boss said the central bank still has “some way to go” in its policy cycle, adding that It’s too early to think about pausing the hike as interest rates could peak. on a higher level than previously thought. Shares rallied briefly as he said a slower pace of rate hikes could come as soon as December.
Megacap technology bears the brunt of the sales, with giants like Apple Inc. and Tesla Inc. down more than 3.5%. US two-year yields – which are more sensitive to impending Fed moves – reversed course and pushed higher. The dollar appreciates.
The Federal Open Market Committee said that “a continued increase” would still be likely needed to bring interest rates to a level “restrictive enough to bring inflation back to 2% over time”, in language freshness added to their statement. Officials unanimously decided to raise the target for the benchmark rate by 75 basis points to a range of 3.75% to 4%, the highest level since 2008.
Ronald Temple, head of US equity at Lazard Asset Management:
“This is not an environment where the Fed will pivot or signal a turnaround. Doing so would be negligent and the Fed knows it. In December, the Fed will have two more inflation reports and two more jobs reports. Then perhaps, the FOMC could signal a deceleration in tightening, but not before that.”
Ian Lyngen and Ben Jeffery, strategists at BMO Capital Markets:
“One thing is clear from the tone of the Fed; ‘Santa Pause’ won’t come to town. “
Edward Moya, senior market analyst at Oanda:
“Stocks could struggle here as the risk of the Fed taking rates above 5.00% is clearly still on the table.”
Sam Stovall, chief investment strategist at CFRA:
“Of course the data will largely determine the future course of policy. Our best guess is that the Fed continues to go down a more hawkish path.”
Quincy Krosby, chief global strategist at LPL Financial:
“Factoring in the bond market’s assessment, the market increasingly believes that the path towards end-of-term interest rates will include a recession.”
Data on Wednesday showed hiring at U.S. companies rose more than expected in October, underscoring labor demand that is likely to recover despite the Fed’s efforts to cool the economy. A strong job market has fueled rapid wage growth, contributed to rapid inflation and pressured the Fed to tighten monetary policy aggressively.
The Treasury paused its longest string of cuts to its quarterly long-term debt sales in about eight years, signaling the end of a historic fiscal deficit reduction period.
In company news, the Boeing executive said the plane maker could generate $10 billion in annual cash by the middle of the decade, once it turns its operations around after years of failures. fail and fail. China has ordered the blockade of the area around Foxconn Technology Group’s main factory in Zhengzhou for seven days, a move that will severely cut shipments in and out of the world’s largest iPhone factory.
This week’s main events:
Bank of England Rate Decision, Thursday
US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday
ECB President Christine Lagarde speaks, Thursday
US Nonfarm Payrolls, Unemployment, Friday
Some key moves in the market:
S&P 500 down 2.5% at 4 p.m. New York time
Nasdaq 100 drops 3.4%
The Dow Jones Industrial Average fell 1.6%
The MSCI World Index fell 1.7%
The Bloomberg Dollar Spot Index is up 0.3%
The euro fell 0.5% to $0.9830
British Pound drops 0.8% to $1.1395
Japanese yen rose 0.3% to 147.77 a dollar
Bitcoin drops 1.1% to $20,245.42
Ether drops 2.5% to $1,536.43
Yields on 10-year Treasuries rose four basis points to 4.08%
German 10-year yield rose one basis point to 2.14%
UK 10-year yield drops 7 basis points to 3.40%
West Texas Intermediate crude rose 1% to $89.23 per barrel
Gold futures fell 0.6% to $1,640 an ounce
Most read from Bloomberg Businessweek
© 2022 Bloomberg LP