Wednesday, April 06, 2022

DJIA: 34,496.51, down 144.67
S&P 500: 4,481.15, down 43.97
Nasdaq: 13,888.82, down 315.35

Stocks lower following Fed minutes

U.S. stocks finished lower on Wednesday as investors grappled with a swift back-up in Treasury yields and digested the Federal Reserve’s (Fed) March meeting minutes. The release revealed that officials “generally agreed” to reduce the size of its nearly $9 trillion balance sheet by $95 billion per month, beginning as soon as their May 4 meeting. The minutes also set the expectation that some of the upcoming interest rate hikes could come in larger 0.50% intervals as policymakers remain committed to clamping down on persistent inflation.

The Dow lost 144 points, while the S&P 500 fell 1%. The Nasdaq Composite retreated 2.2%, extending Tuesday’s sell-off in growth-related shares. Six of 11 S&P 500 sectors closed in negative territory, with Consumer Discretionary and Technology stocks leading the downturn. The more traditionally defensive Utilities and Health Care groups were among the outperformers amid the perceived risk-off tone.

Meanwhile, a rout in longer-dated Treasuries continued as bond markets priced in the most aggressive pace of monetary tightening since 1994. The yield on the 10-year note climbed five basis points (0.05%) to 2.60%, a three-year high, following its biggest single-session increase since March 2020 on Tuesday (+0.15%). Yesterday, Fed Governor Lael Brainard struck a hawkish tone, stating that easing inflation was “of paramount importance” and that the balance sheet run-off would likely occur at a “rapid pace.”

In commodities, West Texas Intermediate crude dropped 4.7% to $97.22/barrel following reports the International Energy Agency would release 60 million barrels of crude, adding to the massive stockpile release announced by the U.S. last week. Separately, data showed an unexpected weekly buildup in domestic crude inventories.

Read more about it here.