Officials of the US Federal Reserve have recently hinted that they “are not confident” that rates of interest are high enough. That is to say that further tightening might be in the offing to finish the battle with inflation. US Fed’s Chair Jerome Powell dictated that US Fed “is committed to achieving that monetary policy stance which is sufficiently restrictive to lower down the inflation to 2% over the course of time, and it is not confident that it achieved such stance.” Equity markets fell on Thursday after these comments from the officials as traders now expect a rate hike when they meet in the next meeting.
Apart from the comments, the equity markets fell on Thursday as treasury yields increased after the disappointing auction of 30-year bonds. With this equity markets snapped the longest winning streaks for both the indexes NASDAQ and S&P 500 in ~2 years. Stocks were slightly lower before the Powell’s comments because yields increased after a weak auction of ~$24 billion in 30-year Treasuries as demand for debt was at ~2.24x the bonds on sale. Benchmark 10-year Treasury note yield saw an increase of ~12.8 basis points at 4.636% after increasing to as high as ~4.654% on Thursday.
Dow Jones Industrial Average saw a decline of ~220.33 points, or 0.65%, to 33,891.94, with S&P 500 losing ~35.43 points, or 0.81 %, to 4,347.35. The equity markets fell on Thursday, with Nasdaq Composite losing its ground as the index fell by ~128.97 points, or 0.94 %, to 13,521.45. With such declines, investors saw the biggest 1-day percentage declines for S&P and Nasdaq since October 26, and largest for Dow Jones since Oct. 27.
After Wall Street saw the strong rally in the week prior, pace of gains slowed, with declines on Thursday ending the eight-session streak of advances for S&P 500 index and 9-session of advances for Nasdaq index.
As per CME Group’s FedWatch tool, there are traders who expect that US Fed will keep the interest rates unchanged in 2023, even after such comments from the US Fed’s Chair. And, they do expect to see rates cuts beginning later in 2024.
Talking about earnings, Walt Disney saw a significant jump of more than ~6.0% as the company beat the quarterly profit estimates and because Hollywood actors reached tentative agreement with major studios. All the 11 of the major S&P sectors ended lower, and the declines were led by healthcare and consumer discretionary as these indexes were ~2% lower.
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