U.S. Stocks Sink as Dollar Swings After Fed Move: Markets Wrap

(Bloomberg) -- U.S. stocks fell and Treasuries rose after the Federal Reserve signaled it’ll keep raising interest rates even as inflation remains tepid.

The S&P 500 fell 0.3 percent, with the bulk of losses coming in the final 20 minutes of trading. Equities earlier gained after the central bank suggested inflation remained tepid, only to reverse as Chairman Jerome Powell said the Fed could raise rates past the perceived neutral level. He also raised concern about fiscal policy, calling its path “unsustainable.” The dollar was little changed after swinging between small gains and losses.

Powell addressed financial markets directly in his comments, saying that officials “judged the overall vulnerabilities to be moderate” while acknowledging some asset prices are in the “upper reach of their historical ranges.” American equities closed Friday at a record, while the 10-year yield rose to near its highest of the year. Oil prices hit a four-year high Tuesday before pulling back amid news U.S. production topped 11 million barrels a day.

The Fed’s statement provided ammunition for hawks and doves alike as investors parsed the language for clues on monetary policy. Officials’ projections for the future path of rates steepened, even as the Fed acknowledged inflation shows no signs of accelerating.

“The market shouldn’t be too surprised by anything,” said Michael Ning, the chief investment officer at PhaseCapital. “I have to give the Fed credibility for being very consistent, and they delivered.”

After most U.S. markets closed, President Donald Trump said he was “not happy” about the rate increase.

“Unfortunately, they just raised interest rates,” Trump told reporters in New York, where he was attending the annual United Nations General Assembly. “I am not happy about that.”

Elsewhere, Japan’s Topix ended just below its highest point in almost eight months, while stocks rallied in Hong Kong as traders returned from a holiday and Chinese shares rose after MSCI Inc. said it’s considering increasing the country’s weight in its global indexes.

Terminal users can read our Markets Live blog.

Here are some key events coming up this week:

• Thursday sees durable goods, GDP data and jobless claims for the U.S.

And these are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.3 percent as of the close of trading in New York.
• The Stoxx Europe 600 Index rose 0.3 percent.
• The Nikkei 225 rose 0.4 percent.
• The MSCI Emerging Market Index climbed 0.5 percent.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro slipped 0.1 percent to $1.1749.
• The British pound weakened 0.1 percent to $1.3169.
• The Japanese yen rose 0.2 percent to 112.78 per dollar.

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.05 percent.
• Germany’s 10-year yield dipped one basis point to 0.53 percent.
• The U.K.’s 10-year yield fell four basis points to 1.59 percent

Commodities

• West Texas Intermediate crude decreased 1 percent to $71.59 a barrel.
• Gold declined 0.5 percent to $1,194.71 an ounce.
• Copper fell 0.2 percent to $2.819 per pound.

--With assistance from Marvin G. Perez, Ravil Shirodkar, Andreea Papuc, Luke Kawa, Sid Verma, Eddie van der Walt, Cormac Mullen and Steve Matthews.

To contact the reporters on this story: Brendan Walsh in Austin at bwalsh8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, ;Samuel Potter at spotter33@bloomberg.net, Brendan Walsh

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