Stocks fall for a second day as rates jump, with the Fed set to tighten policy aggressively

Stocks fell for a second day on Wednesday and rates soared to new heights as investors bet the Federal Reserve is about to tighten policy to fight inflation, and thus slow the economy. economic.

The Dow Jones Industrial Average traded 200 points lower, or 0.6%. The S&P 500 index fell 1.1% and the Nasdaq Composite dropped 2.4% after falling about 2.3% on Tuesday.

Investors are awaiting the minutes of the most recent Fed meeting scheduled for release Wednesday afternoon, which could impact investors’ outlooks and offer fresh clues about the plan. reduce the Fed’s balance sheet. It comes after Fed officials commented on knocking down stockpiles on Tuesday. The minutes came from last month’s meeting when the central bank raised interest rates and said six more hikes would come this year.

The 10-year Treasury yield rose above 2.65% on Wednesday, hitting a three-year high and continuing its rapid rise this week. Rates ended Monday at 2.40%.

Chairman of the Federal Reserve of Philadelphia Patrick Harker said on Wednesday that he was “deeply concerned” about rising inflation. His comments come less than a day after Fed Governor Lael Brainard indicated support for higher interest rates and said the central bank’s balance sheet could shrink “rapidly” in May. Brainard’s statement pushed the stock lower in the previous session.

That’s paramount, Brainard said during the Fed’s webinar in Minneapolis. Brainard has been nominated to be vice chair of the Federal Open Market Committee.

Harker said Wednesday he expects “a series of deliberate, methodical increases as the year continues and the data evolves.” San Francisco Fed President Mary Daly echoes back Similar sentiments on inflation on Tuesday.

What that means for the market is that uncertainty for higher rates and lower cash flow in earnings, growth stocks, could continue, Cliff Corso of Advisors Asset Management told CNBC. discounted when interest rates rise. “

Technology shares fell again on Wednesday after Tuesday’s losses, as investors turned away from the group and braced for higher rates to slow the economy. Apple, Microsoft, Amazon and Tesla contributed to the industry’s decline and sent Nasdaq down again on Tuesday.

Chipmakers Nvidia and Marvell Technology continued to slash prices on Wednesday, dropping 6% and 4%, respectively. As the Federal Reserve raised interest rates, investors began to look for stocks with steady returns and steer clear of stocks that offer future growth.

Meanwhile, Twitter rose 1.5%, continuing its upward momentum amid news that Elon Musk bought a large amount of shares in the company.

The utilities, healthcare and consumer sectors continued to gain on Wednesday, with Amgen, Merck and Johnson & Johnson all up around 2%. Consumer staples like Walmart, Coca-Cola and Procter & Gamble also inched slightly higher.

With a new earnings season set to kick off this month, Goldman Sachs’ David Kostin said Wednesday that stocks with “recovery margins” are better prepared to weather the current environment for a while. Interview with CNBC’s “Squawk on the Street”. That includes names like Alphabet and Nike, which have maintained “high and stable profit margins” even amid the pandemic.

Overall, the U.S. stock market could be up 5% from this gain between now and the end of the year, he said. “If we go into a recession it will be a meaningful recession, but that’s not the base case right now.”

Meanwhile, investors continue to monitor the situation in Ukraine as both the European Union and the US prepare to impose new sanctions on Russia after evidence of war crimes committed by Russia emerged. the army of this country. The sanctions will include a ban on Russian coal imports. (Click here for the latest information.)

Crude oil prices, which have been volatile since the war began, fell on Wednesday after falling on Tuesday and gaining 1%. US oil prices fell about 2.3%, to below $100 a barrel. International benchmark Brent oil prices fell 2% to trade at $104.50 a barrel.

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