US Stocks fall after Fed signals rate hike in March

27 Jan 2022 , 09:45 AM

The US stocks moved mostly lower after erasing early gains on Wednesday, 26 January 2022, weighing the Dow and the S&P500 indexes lower, while the Nasdaq managed to settle above unchanged line.

The late hour selloff on Wall Street came in reaction to the Federal Reserves highly anticipated monetary policy announcement signalling an interest rate hike could be coming soon, citing elevated inflation and a strong labor market.

At the close of trade, the Dow Jones Industrial Average index declined 129.64 points, or 0.38%, to 34,168.09. The S&P500 index fell 6.52 points, or 0.15%, to 4,349.93. The tech-heavy Nasdaq Composite Index grew 2.82 points, or 0.02%, to 13,542.12.

Total shares volume turnover on U.S. exchanges stood at 11.70 billion shares. Declining stocks outnumbered advancing ones on the NYSE exchange by 2322 to 1081 and 126 closed unchanged. In the NASDAQ, 1580 issues advanced, 3200 issues declined, and 234 issues unchanged.

Total 9 of 11 major S&P 500 sector indexes declined, with bottom performing issues were real estate (down 1.66%), materials (down 1.02%), industrials (down 0.82%), and communication services (down 0.79%), while top performing issues included information technology (up 0.72%).

Software giant Microsoft (MSFT) held on to a notable gain after reporting better than expected fiscal second quarter results and providing upbeat guidance due to robust demand for digital software.

ECONOMIC NEWS: The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation. Citing elevated inflation and a strong labor market, the Federal Reserve indicated Wednesday that it plans to begin raising interest rates soon. The Fed left interest rates unchanged at near-zero levels as widely expected but said the Federal Open Market Committee expects it will soon be appropriate to raise the target range for the federal funds rate. In an effort to combat the economic impact of the coronavirus pandemic, the Fed has left interest rates at zero to 0.25 percent since March of 2020. Subsequent interest rate increases and an eventual reduction in the Feds asset holdings would follow as needed, Powell said, while officials monitor how quickly inflation falls from current multi-decade highs back to the central banks 2% target. Powell was explicit that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic.

The central bank also said it would further reduce the pace of its bond purchases to $30 billion per month beginning in February, with the Fed saying it expects to end its asset purchase program by early March. In a separate statement, the Fed outlined plans to significantly reduce the size of its balance sheet, saying it expects to start the reductions after it begins raising interest rates.

Among Indian ADR, Tata Motors fell 0.47% to $31.75, INFOSYS sank 0.4% to $22.39, Wipro fell 1.22% to $7.31, Dr Reddys Labs sank 1.71% to $58.09, and HDFC Bank declined 2% to $65.99. Azure Power Global fell 0.28% to $14.20, and ICICI Bank shed 0.33% to $20.87. WNS Holdings added 0.24% to $83.

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