U.S. stocks ended mostly lower on Wednesday after Fed Chair Jerome Powell hinted that the central bank will soon start hiking rates and tighten other monetary policies in the days to come. The Dow and S&P 500 gave up earlier gains to end in negative territory, while the Nasdaq somehow managed to finish in the green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) slid 0.4% or 129.64 points to close at 34,168.09 points, giving up all its earlier gains in a volatile trading session. The blue-chip index at one time of the trading session had hit as high as 34,815.67 points.
The S&P 500 declined 0.2% or 6.52 points to finish at 4,349.93 points. Real Estate and Communication Services were the worst performers.
The Real Estate Select Sector SPDR (XLRE) declined 1.7%, while the Communication Services Select Sector SPDR (XLC) lost 1.5%. Nine of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq gained less than 0.1% or 2.82 points to end at 13,542.12 points. Shares of Alphabet Inc.
GOOGL
gained 1.8%, while Amazon.com, Inc.
AMZN
fell 0.8%. Alphabet has a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The fear-gauge CBOE Volatility Index (VIX) was up 2.57% to 31.96. A total of 14.50 billion shares were traded on Wednesday, lower than the last 20-session average of 11.58 billion. Decliners outnumbered advancers on the NYSE by a 2.12-to-1 ratio. On Nasdaq, a 1.1.98-to-1 ratio favored declining issues.
Fed’s Stances Put Stocks Under Pressure
Stocks gave up on the initial gains made on Wednesday after the Fed in its first policy meeting of 2022 didn’t hike rates but signaled that it would soon go for rate hikes and tighten the monetary policy. Powell said that the Fed is working on hiking the federal-funds rate at its next policy meeting in March.
He also said that there was “quite a bit of room” to hike rates before its starts hurting the labor market. He also indicated that prices could run higher for a longer period as “inflation risks are still to the upside.” However, Powell clarified that lawmakers are yet to reach a decision on the path of monetary support.
Powell said that policymakers will instead wait till the next few meetings to decide how to raise interest rates and then device a strategy to “significantly reduce” the Fed’s nearly $9 trillion balance sheet.
Investors are still unclear about how the Fed will go tightening the monetary policy and want a clearer picture on this. Powell’s comments saw the 10-year Treasury yield climb 6.1 basis points to 1.8% as investors felt that the central bank might get more aggressive in tightening its monetary policy.
This resulted the high-growth tech stocks to come under pressure once again, taking a toll on the overall markets on Wednesday.
Moreover, stocks have also been taking a beating lately because of disappointing earnings results from some of the big American corporations.
Economic Data
In economic data released on Wednesday, the U.S. Census Bureau said that sale of new single-family homes in December 11.9%. However, it declined 14% on a year-over-year basis.
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