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Wall Street tumbles on a disappointing Fed as Powell confirms no pivot just yet

Bear market

US stocks tumbled after the Fed raised the interest rate by 75 basis points for the fourth consecutive time since June, taking the funds rate to 4%, though it hinted to slow down its pace on hike. Equities jumped initially but retreated sharply on the afterwards press conference as Fed Chair Powell said that the “ultimate level of interest rates will be higher than previously expected”, causing the US bond yields to flip back to rise, with the 10-year treasury yield surging to 4.10% at a one-week high. The US dollar also reversed early losses and strengthened further against the other major currencies. However, the Fed did not actually offer much of a surprise about its stance and further guidance. “Buy the rumour and sell the news” might be the best phrase to describe the market’s moves on Wall Street. 

Click to enlarge the table
  • S&P 500 fell 2.5%, tumbling below key support of 3,800. All 11 sectors in the S&P 500 closed in red, with growth stocks leading losses. Consumer Discretionary, Information Technology and Communication services all slumped more than 3%, and Energy, Materials, and Real Estate were all down more than 2%. The rest of the sectors fell more than 1%.
  • Robinhood’s shares rose 3.4% in after-hours trading due to a beat on earnings expectations. The financial service provider’s third quarter earnings per share is at -$0.20 vs. -$0.3 expected and its revenue came as $361 million vs. $355.27 million. However, the monthly active users decreased by 1.8 million.
  • Apple slumped 3.7%, to 145 due to the Fed shock, along with a Covid lockdownin Zhenzhou, China, where the main iPhone manufacturer, Foxconn Technology Group located. The area has been ordered to enter seven-day lockdown.
  • USD/JPY swung widely on BOJ Kuroda’s speech and Fed Chair’s disappointing rhetoric. The pair plunged more than 2% to 145.67 at the day-low before bouncing back to close to 148. Earlier on Wednesday, BOJ governor Kuroda indicated to make yield curve control a more flexible policy in the future before the Fed Powell’s narrative of expecting higher rates to come at the post Fed’s decision press conference.
  • Chinese stocks continued to rise amid widened speculations on the Covid-zero policy shift. The Hang Seng Index was up 2.4% on Wednesday following a 5% surge on Monday. All the mainland major indices, including Shanghai Component and Shenzhen Component were all up more than 1%. 
  • Equity futures point to a mix open in the Asian markets. ASX futures were down 1.62%. Nikkei 225 futures were down 1.16% and Hang Seng Index futures were up 2.42%. 
  • Gold reversed early gains and finish lower, while crude oil continued to climb. Gold futures pulled back from the day-high of above 1,670, and fell $12 per ounce, to $1,637.8 as the bond yields climbed again, while the US dollar strengthened. Meanwhile, oil futures rose on a decline in US oil inventory data, suggesting supply in the physical markets are still tight.  

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