Fed rate hike fails to calm US markets — MarketWatch
In the United States, the Federal Reserve's interest rate hike failed to calm financial markets: the Dow Jones Industrial Average fell by more than 600 points by the close of trading, while the yield on 10-year US government bonds rose above 5%. MarketWatch reports.
After the Fed announced its decision and released new forecasts, US stocks and bonds initially rose. However, by the end of the day, both markets had turned lower. Bond yields move inversely to their prices: when prices fall, yields rise.
Fed signals
Fed Chair Kevin Warsh said at a post-meeting press conference that the central bank is committed to bringing inflation back to its 2% target. Cetera Financial Group Chief Investment Officer Gene Goldman said markets reacted with volatility as investors assess the possibility of more rate hikes than the regulator's latest forecasts imply.
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NISA Investment Advisors Chief Economist Steven Douglass believes the Fed is signaling its intention to carry out two or three rate hikes. As MarketWatch notes, investors also have to assess how far the regulator is prepared to go in curbing inflation and how a longer rate-hiking cycle will affect markets and the economy.
Oil and bonds
SLW Investments President and Portfolio Manager Vincent An noted that movements in stock and bond markets will continue to depend largely on the situation in the oil market. MarketWatch writes that oil prices have again exceeded $100 per barrel, while the conflict with Iran has entered its seventh month.
Laffer Tengler Investments Head of Fixed Income Byron Anderson expects further volatility. DWS Head of Fixed Income for the Americas George Catrambone said that if oil rises to $125 per barrel, long-term bond yields may continue to increase. In his assessment, this will intensify pressure on consumers due to high fuel prices, while further monetary tightening carries the risk of an economic slowdown.
