Wall Street Close: FOMC, Jerome Powell weigh on the equity benchmarks


  • US equities post losses on bullish Fed, Powell’s inflation concerns.
  • Seven Fed officials expect hikes in 2022 and 13 in 2023, Powell accepts inflation pressure.
  • US 10-year Treasury yields jumped the most since early March.
  • Consumer discretionary and retail battle bears amid growth optimism.

US equity benchmarks posted another day of losses as the Federal Reserve (Fed) matched market fears during the much-awaited Wednesday meeting. Although tapering and rate hike concerns grew momentum after the announcements, economic optimism and already priced-in moves limited the market’s losses.

US Fed matched wide market forecasts of keeping the monetary policy intact but the quarterly economic projections were the key. The policymakers not only revised up the near-term GDP and inflation forecasts but also pumped the rate-hike expectations, mostly known as dot-plot. As per the latest update, US GDP may grow 7.0% in 2021 versus 6.5% previous whereas the PCE figure, the Fed’s preferred inflation gauge, is now seen at 3.4% for 2021 and 2.1% for the next year.

Fed Chairman Jerome Powell also weighed on the stocks by accepting that the inflation run-up could be more consistent than earlier expected. Even so, the Fed Boss highlights vaccine-led economic recovery to push back the rate-hike and tapering concerns, but the markets didn’t believe in them.

Following the Fed-led action, the US dollar index (DXY) jumped the most in over a year while the US 10-year Treasury yields rallied 8.2 basis points (bps) to 1.58%. It’s worth noting that gold slumped and WTI also stepped back due to the FOMC.

This has led to the red prints of all the three key equity benchmarks even as upbeat growth forecasts restricted the losses.

That said, Dow Jones Industrial Average (DJI) loses the most, down 265.66 points or 0.77%, to 34,033.67 while S&P 500 came in second with a loss of 22.89 points or 0.54% to 4223.70. Further, Nasdaq was the least affected, which may be due to the US bond moves, printing 0.24% downside or 33.17 points of declines to 14,039.68.

It’s worth noting that retails and consumer discretionary could also join tech shares to battle the market bears. Stock-specific moves mark Kindred Biosciences as the key winner, up over 45%, following a deal to buy Elanco Animal Health. On the contrary, Inhikibase Therapeutics and Blue Apron were the biggest losers with over 20% daily downside.

Given the market’s awareness of the Fed decision, followed by a not-so-heavy reaction from equities, the bulls may seek a return and can follow the second-tier US activity and jobs data for the purpose.

Also read: Forex Today: Long live King Dollar

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD consolidates weekly gains above 1.1150

EUR/USD consolidates weekly gains above 1.1150

EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.

EUR/USD News
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains

GBP/USD stabilizes near 1.3300, looks to post strong weekly gains

GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains. 

GBP/USD News
Gold extends rally to new record-high above $2,610

Gold extends rally to new record-high above $2,610

Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.

Gold News
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap

Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap

SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.

Read more
Bank of Japan set to keep rates on hold after July’s hike shocked markets

Bank of Japan set to keep rates on hold after July’s hike shocked markets

The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session. 

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Forex MAJORS

Cryptocurrencies

Signatures