Wall Street traders braced for a Federal Reserve rate hike on Thursday sent stocks lower on speculation that Jerome Powell would signal that another hike this year has not been completely ruled out.
After a widely expected 25 basis point hike in July, the exchange market is currently predicting a 52% chance of a hike of that size before the end of the year. Whether that will materialize remains to be seen, but many analysts expect the Fed to at least keep its options open as the central bank takes borrowing costs to their highest level in 22 years.
According to Andrew Brenner at NatAlliance Securities, Powell had no choice but to side with Hawkish. He can't take a dovish tone because policymakers are worried about making a 1981-type mistake when they took their foot off the brake in a hurry.
"The Fed should not have signaled a pause in September, because doing so at the June meeting really ties the Fed's hands at a time when it needs maximum flexibility," said Win Thin at Brown Brothers Harriman. "With labor market conditions strong, we believe the right thing for the Fed to do is to emphasize a more data-driven approach and emphasize that the doldrums in September should not be taken as a guarantee."
The S&P 500 fell from its highest level since April 2022, the Nasdaq 100 of technology companies weakened and the Dow Jones Industrial Average was volatile. If the blue-chip index closes higher, it will be its 13th consecutive gain – the longest winning streak since 1987. Two-year US yields were little changed at 4.87%. The value of the dollar fluctuates. West Texas Intermediate crude traded near $79 a barrel, while copper fell along with industrial metals.
Trading moves on Wednesday were also a flurry of profit reports, with results from tech bigs closely watched after posting historic gains in the first six months of the year.
Google parent Alphabet Inc. rose after earnings beat expectations, while Microsoft Corp. declined due to weak sales growth and Texas Instruments Inc.'s forecast. the weak burden the chip manufacturer. Traders are also awaiting results from Facebook, Meta Platforms Inc. after the closing surge.
The US dollar index, which measures the currency against six major partners, fell 0.1% to 101.010, but was close to hitting a two-week high hit on Tuesday.
