Highlights
Major stock averages sank Wednesday to end at the day’s lows with the selloff in the AI momentum trade deepening and big tech shares down too, with no offsetting rotation into other sectors. Worries about overvaluation in the AI trade and in big tech weighed on those sectors while worries about possible resumption of all-out war between the US and Iran hit the broader market.
Markets did not react much to an as-expected hold announced for interest rates from the Federal Reserve policy meeting but risk appetite certainly did not react well to Fed Chair Kevin Warsh’s ongoing unwillingness to offer policy guidance to the market or his comment that higher interest rates could be part of the solution if excess inflation persists. Some investors appear to be concluding that Warsh is all talk and no action on his pledges to curb inflation, and the late selloff in stocks, in longer maturity Treasuries, and in the dollar are market responses to this concern.
The Dow Jones industrial average lost 2.2 percent while the S&P 500 fell 1.5 percent and the Nasdaq was down 1.7 percent. Bond yields declined in shorter maturities and rose in the longer end. Oil prices surged after President Trump said US military would hit Iran hard in response to Iran's missile attack on US forces in Jordan. The dollar was mixed but mostly lower versus major currencies.