At the opening, the Dow Jones lost 0.72%, the Nasdaq fell by 2.11%, falling below the 14,000 point mark, and the S&P 500 fell by 1.16%.
The New York Stock Exchange fell sharply at the opening on Wednesday as bond rates climbed to a three-year high, pending news from the Fed.
Around 2:00 p.m. GMT, the Dow Jones dropped 0.72% and the Nasdaq plunged 2.11%, falling below the 14,000 point mark, and the S&P 500 lost 1.16%.
On Tuesday, the indices had finished in the red following statements by an official of the American Central Bank on the need to hit “hard” once morest inflation.
The Dow Jones industrial average fell 0.80% to 34,641.18 points. The technology-dominated Nasdaq dropped 2.26% to 14,204.17 points. The S&P 500 was down 1.26% at 4,525.12 points.
The escalation in rates on 10-year Treasury bills continued on Wednesday to reach 2.62% once morest 2.54% the day before, a peak since March 2019, well before the Covid-19 pandemic.
These more hawkish remarks on the rates, issued by Lael Brainard, a governor of the Fed usually rather partisan of an accommodative monetary policy, captured the attention of the markets.
Especially since the official also advocated a “rapid” reduction in the Fed’s balance sheet from May, another monetary tightening measure aimed at curbing stubborn inflation that the Fed has been slow to take seriously.
“We can no longer say that we are not witnessing a severe monetary tightening, even if it is justified in relation to inflation,” commented Gregori Volokhine, of Meeschaert Financial Services.
The views of Lael Brainard, who is also seeking Senate confirmation for a vice-chairmanship at the Fed, “triggered a kind of tantrum on Treasuries and created a new feeling of nervousness”, said Patrick O’Hare of Briefing.com.
The analyst refers to the “taper tantrum” or turmoil of 2013 in the bond market during which investors reacted badly to the news that the Fed was planning to reduce its financial support started with the financial and real estate crisis of 2008.
“This will focus attention on the publication of the minutes of the Fed” in the early followingnoon, underlined Brad Bechtel of Jefferies.
The minutes of the last meeting of the Central Bank should give details on the position of the members of the Monetary Committee on the extent of future rate hikes and the pace of reduction of assets on the balance sheet.
Rates on 30-year mortgages, a benchmark in the US market, crossed the 5% threshold on Wednesday for the first time in more than 10 years.
Home loan applications also fell for the fourth straight week, according to the Mortgage Bankers Association on Wednesday.
Developments on the war in Ukraine also remained at the center of investors’ concerns as the United States and the European Union prepare a new series of sanctions once morest the Kremlin.
On the side, the low-cost airline Spirit, which is the subject of an overbidding from JetBlue following an initial offer from Frontier, dropped 2.30% to 26.28 dollars following having climbed more than 20% the day before just before closing.
The title of JetBlue, which made a counter-offer of 3.6 billion dollars on Spirit, higher than that of Frontier, melted by 6.2%. That of Frontier lost 8.64%.
Twitter was losing some weight (-1.76%) following being celebrated on Wall Street in recent days when Tesla boss Elon Musk announced that he had taken a sizeable stake in the social network, making him its largest shareholder.
Seven out of eleven S&P 500 sectors were down, starting with consumer products (-2.46%) and information technology (-2.21%) through banks (-0, 67%) and real estate (-0.34%).
