Stocks Plummet Following Hawkish Comments From The Fed

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Federal Reserve - Unsplash
The Federal Reserve Building in downtown Washington DC, USA at night. HDR image.

US stocks plummeted dramatically on Friday after the Federal Reserve talked about upcoming significant rate hikes at next month’s policy meeting. 

The S&P 500 and the Nasdaq Composite posted their first weekly loss after one month of gains. 

The US Dollar Index surged to a new one-month high after the hawkish comments from the Fed. St. Lous Fed President James Bullard on Thursday said he might hike interest rates by 75 basis points in September. He added that policy-makers shouldn’t “drag out” hiking rates into next year.

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Meanwhile, San Francisco Fed President Mary Daly on Thursday said rate raises of 50 basis points or 75 basis points next month would be “reasonable.” 

Here are the US indexes results at the opening bell on Friday: 

  •  S&P 500: 4,256.35, down 0.64%
  • Dow Jones Industrial Average: 33,794.18, down 0.60% (204.86 points)
  • Nasdaq Composite: 12,850.37, down 0.89%

“The story into the end of the week is all about a repricing of Fed expectations,” currency exchange LMAX said on its blog. Investors had been looking for more cooperation from the Fed after July inflation fell to 8.5% from 9.1% in June. “And yet, this hasn’t been the case. We’ve continued to hear hawkish speak out from Fed officials and the market is considering the possibility that the Fed pivot trade may be the wrong way to go, and that the Fed won’t be looking to cut rates next year at all,” LMAX said. 

 

Gold plummeted 0.3% at $1,766.40 per ounce. The 10-year Treasury yield soared nine basis points to 2.95%.