FOMC creates an outflow from stocks with hawkish sentiments
S&P 500 futures have dropped back under the 4000 level, which is a psychological barrier. This happened after Fed Chair Jerome Powell killed hopes of rate cuts next year. Interest rates and economic data continue to drive price changes for another week. Another 0.5% rate hike from the ECB, BoE, and Fed continues to weigh on assets with lower yields.
Even though the moves just as expected, people’s feelings changed after the FOMC meeting confirmed that rates would likely stay high through 2023. As investors weighed the hawkish talk against the expected future of the economy, investors turned bearish on stocks, which pulled SPX down. The Dow Jones Industrial Average lost 801 points or 2.4%, while the S&P 500 was down 2.5%. The NASDAQ Composite was down 3%.
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Shares of Tesla Inc. went up 0.3% after CEO Elon Musk said that the company was selling another $3.6 billion worth of stock. This year, the stock is down more than 55%. Shares of Netflix Inc. fell 8% after a report said that its new ad-supported subscription tier wasn’t meeting the viewership goal it had promised advertisers.
Dollar regained its position with European central banks hikes
In a risk-averse market, the US dollar rose to new weekly highs against most major rivals and ended the day with big gains. The greenback has been going up since early Asia, when China released some bad macroeconomic data.
In China, retail sales fell by 5.9% year over year in November, while Industrial Production rose by 2.2%, which was less than the 3.6% expected. The dollar also got a boost from hawkish comments made by US Federal Reserve chairman’s decision.
With the news from ECB, the EUR/USD pair went up and peaked at 1.0735. But Wall Street’s slow start up brought back worries about growth. US indexes went down, and the dollar went up. Currently, the EUR/USD exchange rate is around 1.0620. USD/CAD is up to 1.2670, while AUD/USD is down to 0.6690. During this time, USD/JPY went up to 137.80.
Dollar rally made oil harder to get
Oil’s three-day rise came to an end on Thursday, when the Keystone pipeline reopened after being closed. Also the Federal Reserve put more pressure on risky assets like stocks and oil by keeping interest rates high until inflation dropped in a convincing way. As the dollar rose for the first time this week, both US West Texas Intermediate crude and U.K. Brent oil fell by up to 2%.
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Brent crude for delivery in February settled at $81.21 per barrel, down $1.49, or 1.8%. Earlier, it went down to $80.86. Before the rally stopped, the global crude benchmark had gone up about 8% in the last three days.
WTI Crude Oil for delivery in January ended up at $76.11, down $1.17, or 1.5%. Earlier, it went as low as $75.38 during the day. WTI has gone up 8% in the same time period as Brent. Last week, the price of US crude fell by $9.28, or 11%. This was the worst week since the week that ended on March 25th.