US stocks drop as traders take in Fed minutes and reassess rate outlook

US stocks drop as traders take in Fed minutes and reassess rate outlook

 

As investors processed the Fed’s most recent meeting minutes, US markets declined on Wednesday.Central bankers adopted a little more hawkish tone as they stressed their 2% inflation target.
Investors do, however, still expect a few rate reductions in 2024.
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US markets dropped on Wednesday as investors reevaluated their expectations for future interest rate reduction in 2024 after reading the Federal Reserve’s December meeting minutes.

Even as equities recovered some of their worst losses of the day, the major indexes continued to decline. The minutes from the Fed’s December FOMC meeting, in which central bankers expressed a somewhat hawkish prognosis for the US economy, were analyzed by investors. Authorities underscored their dedication to bringing inflation back to 2%, implying that rates may be higher for a longer period of time than the markets anticipate.

“In light of the policy restraint in place, along with more favorable data on inflation, participants generally viewed risks to inflation and employment as moving toward greater balance,” said central bankers, adding that the Fed remained “highly attentive to inflation risks.”

Nonetheless, investors continue to anticipate rate decreases from the Fed this year. According to the CME FedWatch tool, markets are pricing in a 33% possibility that rates would drop past 3.75% by the end of the year, up from just a 15% chance factored in a month ago.

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In the afternoon, the 10-year Treasury yield decreased to 3.903%, or roughly four basis points.

“The December FOMC meeting minutes are a little bit hawkish, but not enough to scare the markets,” chief economist Jeffrey Roach of LPL Financial stated in a statement on Wednesday.

Here are the US indices as of the 4:00 p.m. closing bell on Wednesday:

The S& P 500 is down 0.8% at 4,704.81.

Dow Jones Industrial Average: 37,430.19, a 0.76% decrease (-284.85 points).

The Nasdaq Composite fell 1.18% to 14,592.21.

Today also saw the following events:

For the first time, the US national debt surpassed $34 trillion.
Investors are overestimating a Goldilocks situation, and interest rate decreases are unlikely to occur anytime soon.
According to one crypto business, the SEC is likely to reject a spot bitcoin ETF, sending values down by up to 20%.
According to one energy expert, oil prices might rise by 15% as a result of inevitable interruptions in the Middle East.
THE DAY’S CHART: The combined stock markets of three first-world countries now equal the Magnificent Seven.
According to UBS, artificial intelligence will grow to a $225 billion business by 2027.
According to “Big Short” star Steve Eisman, investors are “too fricking happy” and markets will soon crash.
Commodities, bonds, and cryptocurrency:

Oil prices skyrocketed. The price of West Texas Intermediate crude oil increased 3.8% to $73.08 a barrel. Brent crude rose 3.5% to $78.57 a barrel, the worldwide benchmark.
Gold fell 1.1% to $2,049.80 per ounce.
The yield on the 10-year Treasury note declined four basis points to 3.903%.
Bitcoin has dropped 5% to $42,752.

 

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