Highlights
Equities ended slightly lower Wednesday after recovering from the day's worst levels triggered by the Federal Reserve policy announcement. Bond yields also ticked up after the Fed statement at 2 p.m. ET but gave back some of the increase on follow-up comments from Fed Chair Jerome Powell. Still, the overall assessment was the Fed leaned slightly hawkish.
The Dow Jones industrial average eased by 0.3 percent, the S&P 500 and the Nasdaq both lost 0.5 percent. US bond yields were slightly higher. The dollar rose and oil prices dipped.
The initial reaction in stocks and bonds was negative as investors took note of the Fed's decision to remove language from the policy announcement recognizing progress on inflation. During the press conference however, Powell clarified that the omission was not intended as any kind of policy signal, and the markets recovered some ground.
In general, the policy news largely matched expectations even if it leaned a bit hawkish. Powell repeatedly said the Fed is in no rush to alter policy, it expects more progress on inflation, and wants to see progress before cutting rates. Markets continue to expect rate cuts in mid-year and later. Powell was also at pains to avoid commenting on Trump administration policy or its bearing on Fed policy. He repeated that the Fed would proceed as it always has regardless of pressure for rate cuts.
Among sectors, technology shares suffered, with Nvidia the featured loser. Software had a bad day along with health care, EVs, homebuilders, and aerospace & defense. Restaurants, airlines, big banks and drug stores were among the best performers.
The Dow Jones industrial average eased by 0.3 percent, the S&P 500 and the Nasdaq both lost 0.5 percent. US bond yields were slightly higher. The dollar rose and oil prices dipped.
The initial reaction in stocks and bonds was negative as investors took note of the Fed's decision to remove language from the policy announcement recognizing progress on inflation. During the press conference however, Powell clarified that the omission was not intended as any kind of policy signal, and the markets recovered some ground.
In general, the policy news largely matched expectations even if it leaned a bit hawkish. Powell repeatedly said the Fed is in no rush to alter policy, it expects more progress on inflation, and wants to see progress before cutting rates. Markets continue to expect rate cuts in mid-year and later. Powell was also at pains to avoid commenting on Trump administration policy or its bearing on Fed policy. He repeated that the Fed would proceed as it always has regardless of pressure for rate cuts.
Among sectors, technology shares suffered, with Nvidia the featured loser. Software had a bad day along with health care, EVs, homebuilders, and aerospace & defense. Restaurants, airlines, big banks and drug stores were among the best performers.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
