The Federal Reserve hinted that a rate hike would come sooner than the Fed had previously expected. The shadow of QE tapering loomed again as U.S. stocks sank and the dollar and U.S. bond yields jumped.
Before the Fed announced its monetary policy resolution, the three major U.S. stock indexes shook down, the S&P and the Dow turned down at the beginning of the session, led by the financial sector, the Nasdaq was supported by some leading technology stocks such as Apple, but as most technology stocks turned down, the afternoon session also turned down. The Federal Reserve announced after the meeting, keeping near-zero interest rates and QE bond purchases unchanged, but most officials are expected to raise interest rates in 2023 and may raise rates at least twice by the end of 2023, while more than 60% of officials in March this year are also expected not to raise rates in 2023. U.S. stocks fell rapidly after that, and the dollar and U.S. bond yields jumped.
At a press conference after the meeting, Fed Chairman Powell said the meeting talked about discussing QE tapering, but it was not a formal discussion. He did not reveal the specific time of the reduction, but said the meeting did not discuss whether it is appropriate to raise interest rates in a particular year, raising interest rates in the “very distant future”. Since then the three major U.S. stock index narrowed most of the day’s losses, the Nasdaq once turned up.
Gold and silver futures turned lower after hours under the pressure of a rapidly rising dollar and U.S. bond yields, while cryptocurrencies led by ethereum extended their losses, with bitcoin falling below $39,000.
In other commodities, U.S. EIA crude oil inventories fell by more than 7.3 million barrels last week from a year earlier, almost tripling market expectations for a single week and falling for a fourth straight week, as crude oil futures continued to close at a more than two-year high, but also turned lower after hours amid a high dollar. Copper, which suffered its biggest drop in eight months on Tuesday, rebounded but gained limited ground, failing to recover $10,000, and nickel, which also plunged 4 percent on Tuesday with copper, continued to sink. According to Futures Daily, sources said rumors that the SASAC will start to strictly investigate SOEs’ overseas futures positions after the Dragon Boat Festival are not exactly right, but some news is not empty: the SASAC recently asked SOEs to strictly manage financial derivative business, control risks and strictly adhere to the hedging principle.
In Europe, the pan-European stock index, which closed just before the end of the Fed meeting, was supported by a rebound in travel stocks, which bucked the market’s lead on Tuesday, to reach a record high for the ninth consecutive day. As Spain’s antitrust regulator launched a banking investigation, the banking sector led the market down, dragging down the Spanish stock index and software giant SAP fell even to the German stock index closed lower, German stocks fell to record highs.
Dow closed down more than 200 points for the first time in four weeks Consumer necessities and utilities sector led the S&P down Tesla closed up against the market to regain $600
The three major U.S. stock indexes opened collectively higher, but the S&P 500 and the Dow Jones Industrial Average quickly turned lower at the beginning of the session, and the decline was significantly extended at the end of the morning session. Before the Federal Reserve announced its resolution, the S&P fell more than 0.2% at lunchtime when it brushed a new daily low, and the Dow once fell more than 110 points. The Nasdaq Composite Index rose 0.4% in early trading to a new daily high, and turned lower at the beginning of the afternoon session.
After the Fed’s resolution, the three major indices collectively set a new daily low, the Dow once fell more than 380 points, the S&P fell by 1%, the Nasdaq once fell 1.2%. During Powell’s conference, the Nasdaq had a short turn up, the Dow’s decline once narrowed to within 160 points, the S&P erased most of the losses.
Eventually, the three major indices collectively closed lower for the second consecutive day. The Dow fell for three days in a row, closing down 265.66 points, or 0.77%, at 34033.67 points, closing down more than 200 points for the first time since May 18, a new low closing since May 19. The S&P closed down 0.54% at 4223.70, the largest closing loss since May 18 and a new low since last Wednesday, June 9. The Nasdaq closed down 0.24% at 14,039.68, the lowest closing level in the last four days.
Value stocks dominated the small-cap index Russell 2000 only at the end of the morning session had a short turn up, once down 1% after the midday Fed meeting, and finally closed down 0.23%. Technology stocks for the heavy Nasdaq 100 index closed down 0.34%.
Dow components, Dow Chemical, Wal-Mart fell more than 2%, 3M, Boeing, WBA, Honeywell, Intel, Coca-Cola, Home Depot, etc. fell more than 1%, but Merck rose more than 1%. S&P 500’s 11 major sectors fell on Wednesday, down more than 1.5% of essential consumer goods and fell nearly 1.5% of the utilities led the decline, materials also fell more than 1%, industrial fell nearly 1%, the bottom of the decline was down more than 0.1% of the financial.
Leading technology stocks were mixed. FAANMG six major technology stocks, closing up 0.95% of Amazon’s best performance, Apple had risen nearly 1% in early trading, but had turned down at lunchtime, closing up nearly 0.4%, the end of the turn up Nifty closed up 0.1%; Facebook overall low opening low Go, closing down nearly 1.7%, more than once in the session turned down Google parent company Alphabet closed down more than 0.5%, the lunchtime turn down Microsoft closed down nearly 0.4%.
Gold stocks fell en masse as gold fell below the $1,830 mark, with gold mining stocks ETFs down more than 2%. Banking ETFs rose more than 1%, leading gains in U.S. stock ETFs across sectors, accompanied by a decline in U.S. bonds, while utilities ETFs led declines, down 1.4%.
In Europe, the pan-European stock index Euro Stoxx 600 rose for nine consecutive days and closed at a new record high for the ninth day in a row, refreshing the longest closing record high day ever set on Tuesday. Among the various sectors, Tuesday’s decline of more than 2% led by travel and leisure rose nearly 1.3% to lead the pack, down more than 0.8% of the banks fell to the top. Spanish banking stocks Banco Sabadell and Caixabank both fell more than 3%, Santander fell 2%. Among major European countries, German and Western stocks were the only two to close lower on Wednesday.
The dollar index rose above 91 for the first time in a month Bitcoin fell below $40,000 for a time, down more than 5% Ether fell 7% during the day
The ICE dollar index (DXY), which tracks the exchange rate of a basket of six major currencies of the dollar, had fallen below 90.45 in early trading in Europe to refresh the daily low, down 0.1% during the day, U.S. stocks had turned up in the pre-market and early trading, and had turned up again before the Fed’s resolution was announced, but the rise and fall was very small. After the Fed’s resolution, the dollar index jumped, U.S. stocks rose above 91.28 at lunchtime, rising above 91.00 for the first time since early May, up more than 0.8% during the day.
By Wednesday’s U.S. stock market close, the dollar index was above 91.20, up nearly 0.8% during the day; the Bloomberg Dollar Spot Index rose 0.8%, the largest gain in about a year. After the bell, the dollar index rose further to 0.95%.
Influenced by the high dollar, the offshore yuan (CNH) fell for the fourth consecutive trading day. At 5:59 p.m. Beijing time on May 17, the offshore yuan was at 6.4405 yuan against the dollar, a new low since the end of New York on May 17, down 336 points from the end of New York on Tuesday, and the U.S. stock once fell to 6.4420 yuan at midday, a new intraday low since May 17.
Bitcoin (BTC) fell below $40,000 during the European session and has continued to move lower since then. U.S. stocks fell below $38,400 at one point during midday as the dollar index surged, setting a new intraday low for the week and falling more than $2,000, or more than 5%, from the intraday high before the European session, with U.S. stocks closing below $38,600, down more than 2% in the last 24 hours.
Ether (ETH), the second-largest cryptocurrency by market capitalization after Bitcoin, fell below $2,400 at midday on U.S. stocks, dipping as low as $2,380, also hitting a new intraday low within three days this week, down about 7% from its intraday high in early Asian trading, and closing slightly above $2,410 on U.S. stocks, down 4% in 24 hours.
CoinMarketCap data shows that mainstream cryptocurrencies fell across the board on Wednesday, with ETH leading the most recent 24-hour decline by the U.S. stock close, the fourth-largest cryptocurrency by market capitalization, coinancoin (BNB), and the 11th-largest cryptocurrency, bitcoin cash (BCH), down more than 3% in 24 hours, and the 11th, seventh, fifth and sixth-largest cryptocurrencies, litecoin (LTC), ripple ( XRP), Cardano (ADA), and Dogcoin (DOGE) all fell more than 2%.
10-year U.S. bond yields rise the most in three months, 2-year yields hit a one-year high
U.S. 10-year benchmark Treasury yields fell below 1.49% in early European trading, once approaching 1.48% midday to refresh the daily low, and last Friday fell below 1.43% set by the intraday trough since early March is still a distance, the day fell about 1 basis point, U.S. stocks had regained 1.49% in early trading, before the Fed resolution was announced, the midday trading was basically close to 1.49% but below the 1.49% level.
After the Fed’s resolution was announced, the 10-year U.S. bond yield jumped around 1.49%, once up to test 1.59%, a new intraday high since June 4, up more than 9 basis points during the day, to the U.S. stocks closed at nearly 1.58%, up more than 8 basis points during the day, the largest increase since March 12.
The 2-year U.S. bond yield rose above 0.2% for the first time since last June.
30-year and 5-year U.S. bond spreads once expanded to more than 129.5 basis points during the day, and the yield curve of 5-year and 30-year U.S. bonds fell to the lowest trough this year.
European government bonds mostly rebounded in price on Wednesday, ending a two-day losing streak, with Greek government bond yields rising for two days in a row. British 10-year benchmark bond yields fell 1.9 basis points to 0.739% during the day; German bund yields fell 1.8 basis points to -0.25% during the same period.
Copper out of more than seven weeks trough three days failed to recover $10,000 Gold futures closed out of a one-month low after the dive once fell 3%
London base metal futures were mixed on Wednesday. Copper ended a two-day losing streak, out of the more than seven-week trough hit on Tuesday, closing up 1% at $9,667 / ton, partially erasing Tuesday’s 4% drop in the largest decline of eight months, but the gains were limited, closing below $10,000 for the third consecutive day. Lunnickel, which both plunged 4 percent on Tuesday and copper, continued to fall, hitting another three-week low. Aluminum, zinc and lead rebounded, with zinc and lead approaching three-month highs. Lun tin fell for a second day to $31,215 per ton, still holding the $31,000 mark.
New York gold futures had ended a three-day losing streak by the close ahead of the Fed resolution. COMEX August gold futures closed up 0.3% at $1,861.40/oz, coming off a closing low for the main contract since May 14 set on Tuesday.
But after the close, gold futures dived after the Fed’s resolution was announced, quickly stopping its gains and falling back down, once below $1,810, and had fallen as much as 3% after the bell.
New York silver futures to the end of the day to reverse a two-day losing streak, COMEX July silver futures closed up 0.4% at $ 27.81 / ounce, out of the trough hit on Tuesday since June 3. But silver also turned lower late in the session, once approaching the $27 mark, down nearly 3% after hours.
U.S. oil hit a two-day streak of more than two-and-a-half-year highs, and bunker oil hit a five-day streak of two-year highs, turning lower after the bell
International crude oil futures continued to close higher, but turned lower after the bell.
U.S. WTI July crude oil futures closed up $0.03, or 0.04%, at $72.15 per barrel, marking two consecutive days of new closing highs for the main contract since Oct. 10, 2018, and two consecutive days of new highs for U.S. oil since Oct. 16, 2018, as of last Friday.
Brent August crude oil futures closed up $0.40, or 0.54%, at $74.39 per barrel, a new closing high for the main contract since April 24, 2019, after closing at a new high since April 25, 2019, for two consecutive days as of Monday and a new high since April 30, 2019, both last Thursday since May 16, 2019.
After-hours U.S. oil fell below $72, down 0.7% at one point, and Brewer’s oil fell below $74, down nearly 0.7% at one point after-hours.
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