March 31, 2023

Great Indian Mutiny

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The Standard & Poor’s closed lower as the Fed’s meeting minutes failed to stem the loss

  • The Fed’s minutes say almost all of them agreed to an increase of 0.25% last time
  • The need to control inflation is likely to mean further hikes
  • Standard & Poor’s is down for the fourth consecutive session

(Reuters) – The Standard & Poor’s 500 (.SPX) extended to four straight sessions as Wall Street closed broadly lower on Wednesday, with traders cautious even though recent guidance on interest rate policy from the US central bank showed little of surprises.

Minutes from the Fed from January 31 to February. The first meeting said that “almost all Fed officials agreed to slow the pace of interest rate increases to a quarter of a percentage point.

There was also strong support though on the belief that higher inflation risks remained a ‘major factor’ that would shape monetary policy and that further rate hikes would be necessary to bring them under control.

Such messages hold few surprises versus what the Fed and its governors have been conveying in recent weeks. Stocks have been broadly flat in the wake of the minutes’ release, after trading volatilely before they were published.

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However, general weakness in the last hour of trading pushed the scales into the red.

“The Fed is clearly determined to continue its campaign to raise interest rates, and they will do so even as recession risks grow,” said Ed Moya, senior market analyst at OANDA.

“And that’s why, after absorbing the minutes, I saw the markets pull back a little bit.”

According to preliminary data, the S&P 500 index lost 5.82 points, or 0.15%, to close at 3,991.52 points, while the Nasdaq Composite Index rose 16.23 points, or 0.14%, to 11,508.54 points. The Dow Jones Industrial Average fell 76.01 points, or 0.23%, to 33,053.58.

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Despite the declines on Wednesday, the declines were not as severe as the day before, which was the worst daily performance the markets have recorded in 2023. Tuesday’s drop wiped out the Dow Jones Industrial Average (.DJI)’s lead so far this year.

After the market crash in 2022, the three major indices posted monthly gains in January as investors hoped the Fed would halt its interest rate increases and possibly pivot towards the end of the year.

However, stocks were volatile in February, as traders priced in higher interest rates for longer, assuming inflation remained higher given a strong economy.

Money market participants expect rates to peak at 5.35% by July and to remain around those levels until the end of 2023.

“We’ll see what happens to stocks, but I think bearish momentum should be driving over the next couple of weeks,” said OANDA’s Moya.

Most of the 11 major S&P 500 sectors declined, with energy (.SPNY) and real estate (.SPLRCR) among the poorest performers.

The energy index closed lower for seven consecutive sessions, as commodity prices were pressured by investor concerns about future economic growth and fuel demand.

Additional reporting by Johan M. Cherian and Medha Singh in Bengaluru and David French in New York; Editing by Margarita Choi

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