Investors Remain Rattled by Fed’s New Tilt…..
U.S. equities finished out another volatile week solidly lower, with the Dow and S&P 500 posting sharp weekly losses and the Nasdaq erasing its advance for the week. Volatility persisted in the wake of Wednesday’s incremental shift by the Fed to a slightly more hawkish tone which has caused uncertainty to rise regarding how soon the central bank will begin to rein in its asset purchases. Comments from St. Louis Fed President Bullard—a non-voting member this year—added to the Fed’s hawkish tenor with his comments this morning. Treasuries were mixed, with yields on the short-end jumping and the long-end falling to flatten the yield curve, pressuring cyclically-natured sectors, notably Financials. The U.S. dollar continued its rally and gold modestly added to the tumble seen this week, while crude oil prices rebounded slightly from yesterday’s fall. In equity news, Adobe topped quarterly expectations and issued upbeat guidance, and Fox Corporation increased its share buyback program. The economic calendar was void of any major releases today. Europe finished with broad losses, while markets in Asia finished out the week mixed.
The Dow Jones Industrial Average plummeted 533 points (1.6%) to 33,290, the S&P 500 Index fell 55 points (1.3%) to 4,166 and the Nasdaq Composite declined 131 points (0.9%) to 14,030. In very heavy volume, as a result of quadruple witching day—where options and futures contracts simultaneously expire for stocks and indexes—2.7 billion shares were traded on the NYSE and 6.0 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.60 to $71.64 per barrel. Elsewhere, the Bloomberg gold spot price declined $3.19 to $1,770.31 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.4% to 92.23. Markets were lower for the week, as the DJIA tumbled 3.5%, the S&P 500 lost 1.9%, and the Nasdaq Composite moved 0.3% to the downside.
Treasuries remained choppy after yesterday’s rebound from Wednesday’s drop that lifted yields solidly due to the initial reaction to the Fed’s monetary policy decision, in which the Central Bank pulled forward its time frame for when it may begin to raise its benchmark target for the fed funds rate, while boosting its inflation and economic growth forecasts. The U.S. dollar has also rallied noticeably in the wake of the Fed’s announcement.
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