Fed minutes drag down US stocks, boost dollar
AFP – Wall Street stocks tumbled and the dollar moved decisively higher after Federal Reserve meeting minutes solidified expectations that the US central bank would lift interest rates next month.
Equity markets were mixed elsewhere, with Hong Kong and London rising, while Paris, Frankfurt and Tokyo finished little changed.
US stocks were in positive territory most of the session, but began falling about 40 minutes after the Fed released the minutes of last month’s policy meeting. The report showed central bankers believe the recent tax cuts could juice the economy more than expected in the near term, meaning further interest rate hikes likely will be needed.
The minutes kept the Fed on track to hike rates in March, which is "not new news, but confirmation" of expectations, said Art Hogan, chief market strategist at Wunderlich Securities.
Hogan said the weakness in equities coincided with a jump in the yield of the 10-year Treasury bond to a four-year high, reviving worries that higher rates could crimp growth and potentially prod more investors to exit equities in favor of bonds.
The S&P 500 ended down 0.6 percent.
The minutes also reverberated through the foreign exchange markets, further boosting the dollar at the expense of the euro and other currencies.
"The intimate notes of the Fed’s late January meeting sketched a brighter outlook for the world’s biggest economy, suggesting full steam ahead for a rate hike next month," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
"While the minutes stopped a bit short of introducing the risk of a faster pace of rate hikes this year, they didn’t quash that view either, buoying the greenback."
European equities were mixed, with London pushing higher in part due to the drop in the pound.
Paris posted small gains at the close, but Frankfurt fell modestly "after a string of disappointing" eurozone manufacturing numbers, noted Connor Campbell, financial analyst at Spreadex trading group.
Among individual stocks, the share prices of mining giant Glencore and Lloyds Banking Group enjoyed solid gains following well-received earnings updates.
Walmart was again the biggest loser in the Dow, shedding another 2.8 percent following Tuesday’s disappointing earnings report that led to the retail giant’s worst day on Wall Street in more than 30 years.
The Dow’s biggest gainer was United Technologies, which advanced 2.2 percent after its Pratt & Whitney division said it found a solution to problems with an aircraft engine that has led to the grounding of some Airbus 320 planes.
– Key figures around 2140 GMT –
New York – DOW: DOWN: 0.7 percent at 24,797.78 (close)
New York – S&P 500: DOWN 0.6 percent at 2,701.33 (close)
New York – Nasdaq: DOWN 0.2 percent at 7,218.23 (close)
London – FTSE 100: UP 0.5 percent at 7,281.57 points (close)
Frankfurt – DAX 30: DOWN 0.1 percent at 12,470.49 (close)
Paris – CAC 40: UP 0.2 percent at 5,302.17 (close)
EURO STOXX 50: DOWN 0.1 percent at 3,430.16
Tokyo – Nikkei 225: UP 0.2 percent at 21,970.81 (close)
Hong Kong – Hang Seng: UP 1.8 percent at 31,431.89 (close)
Shanghai – Composite: Closed for public holiday
Euro/dollar: DOWN at $1.2286 from $1.2336 at 2200 GMT
Pound/dollar: DOWN at $1.3919 from $1.3995
Dollar/yen: UP at 107.74 yen from 107.32 yen
Oil – Brent North Sea: UP 17 cents at $65.42 per barrel
Oil – West Texas Intermediate: DOWN 11 cents at $61.68 per barrel