DJIA: 34,641.18, down 280.70
S&P 500: 4,525.12, down 57.52
Nasdaq: 14,204.17, down 328.38

Stocks, bonds retreat on hawkish Fed comments

U.S. stocks slumped on Tuesday as Wall Street assessed hawkish central bank commentary. Federal Reserve (Fed) Governor Lael Brainard expressed urgency around easing inflationary pressures, suggesting that officials could begin reducing the balance sheet rapidly as early as next month. The release of the Fed’s March meeting minutes tomorrow is expected to provide further details around the central bank’s plan to trim its bond holdings. The Dow slid 280 points, while the S&P 500 lost 1.3%. The Nasdaq Composite retreated 2.3% amid weakness in growth-related stocks. The tech-heavy index slipped back in correction territory (defined as a 10% decline from a recent peak).

Treasuries tumbled, with the yield on the two-year note jumping 12 basis points (0.12%) to 2.53%, its highest level since March 2019. The 10-year note yield spiked 15 basis points (0.15%) to 2.55%. On the data front, the Institute for Supply Management revealed that U.S. services sector growth accelerated in March, with the purchasing managers’ index (PMI) rising for the first time in four months. The prices paid component climbed to the highest on record. Separately, the U.S. trade deficit held at a record $89.2 billion in February.

Risk sentiment was also dented by news that the European Union is proposing new sanctions on Moscow. These penalties would include a ban on Russian coal and chemicals, though they hold off on prohibiting oil and gas imports. West Texas Intermediate crude slid 3% to $100.15/barrel amid a stronger U.S. dollar. Seven of 11 S&P 500 sectors ended in negative territory, with the more traditionally defensive groups bucking the downtrend.

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