Nasdaq Posts Biggest Daily Drop Since Feb After ‘Hawkish’ Fed Minutes - Doo Prime News
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Nasdaq Posts Biggest Daily Drop Since Feb After ‘Hawkish’ Fed Minutes 

U.S. stocks fell sharply on Wednesday, with the Nasdaq plunging more than 3% in its biggest one-day percentage drop since February, after U.S. Federal Reserve meeting minutes signaled the central bank may raise interest rates sooner than expected. 

The S&P 500 fell more than 1%, its biggest daily percentage decline since Nov. 26, the first day of trading after news of the Omicron variant of the coronavirus. 

The S&P 500 and Nasdaq quickly extended their declines after the release of the minutes, which investors viewed as more hawkish than they had feared. The Dow, which hit a record high earlier in the day, reversed course and ended down more than 1%. 

The selloff was broad, with all S&P sectors ending in the red, and Wall Street’s fear gauge, the Cboe Volatility index (.VIX), closing at its highest level since Dec. 21. 

In the minutes from the Fed’s Dec. 14-15 policy meeting, central bank policymakers said a “very tight” job market and unabated inflation might require the Fed to raise rates sooner and begin reducing its overall asset holdings as a second brake on the economy.  

“Indications that the Fed is very concerned about inflation could quickly create a view that the Fed will aggressively tighten in 2022,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York, calling the minutes “more hawkish than expected.” 

Full coverage: REUTERS 

Growth In China’s Dec Services Accelerates – Caixin PMI 

Activity in China’s services sector expanded at a faster pace in December amid higher demand and easing inflationary pressure but continuing small-scale COVID-19 outbreaks weighed on the outlook, a private sector survey showed on Thursday. 

The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 53.1 in December from 52.1 in November, remaining above the 50-point mark that separates growth from contraction on a monthly basis. 

The survey, which focuses more on small firms in coastal regions, tallied with those of an official survey, which also showed the expansion in the services sector sped up.  

Analysts say the services sector, which has been slower to recover from the pandemic than manufacturing, is more vulnerable to sporadic COVID-19 outbreaks and anti-virus measures, with leisure and tourism businesses hurt the most. 

Most of China’s recent local cases have been in the northwestern province of Shaanxi, where the capital city Xian has been on lockdown to control the spread of the disease.  

Firms’ input prices rose for the 18th month in a row, but at a slower pace, the survey showed. A sub-index for employment rose at the fastest pace since May, and a gauge of new business accelerated. 

Full coverage: REUTERS 

WORLDWIDE: FINANCE/MARKETS 

Asian Shares Fall After Hawkish Fed Minutes 

Asian shares fell on Thursday, extending a global slump after Federal Reserve meeting minutes pointed to a faster-than-expected rise in U.S. interest rates due to concerns about persistent inflation. 

Worries over higher U.S. rates combined with growing concerns about the rapid spread of the Omicron coronavirus variant to weigh on riskier assets. 

Asian shares took their cue from overnight losses on Wall Street. The Nasdaq (.IXIC) plunged more than 3% on Wednesday in its biggest one-day percentage drop since February and the S&P 500 (.SPX) fell the most since Nov. 26, when news of the Omicron variant first hit global markets. 

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.95%, Australian shares (.AXJO) slid 1.53% and Japan’s Nikkei stock index (.N225) fell 2.08%. 

Chinese blue-chips (.CSI300) fell 1.37% as a private sector survey showed China’s service sector activity expanded more quickly in December, but continuing COVID-19 outbreaks weighed on the outlook. read more 

Elsewhere, an investor rotation out of technology continued to hit high-profile names, with Sony Group (6758.T) slumping 6.8%. 

“There is a risk that the Fed might fall into the trap of making policy errors because they do have to perhaps hike interest rates faster than expected, but given the timing of their exit from quantitative easing, it could coincide with a slowdown in the economic cycle and also a decline in inflation on base effects,” said Carlos Casanova, senior economist for Asia at Union Bancaire Privee in Hong Kong. 

Full coverage: REUTERS 

Dollar Near Five-year High To Yen As U.S. Yields Surge On Hawkish Fed 

The dollar hovered near a five-year high to the yen on Thursday, supported by a surge in U.S. Treasury yields on rising bets for a Federal Reserve rate hike by March. 

The greenback stood at 116.115 yen, little changed from Wednesday, when it rallied back toward Tuesday’s high of 116.355, lifted by more hawkish rhetoric from Fed official and a strong U.S. jobs report.  

Anticipation of faster policy tightening dented riskier assets, with the British pound retreating from a near two-month high and cryptocurrencies tumbling toward multi-month lows. 

Fed officials said the “very tight” U.S. labor market might warrant raising rates sooner, and indicated they could also reduce the central bank’s overall asset holdings to tame high inflation – a process dubbed quantitative tightening (QT) -minutes of their Dec. 14-15 policy meeting showed. 

In the wake of that, futures on the federal funds rate priced in a roughly 80% chance of a quarter-percentage-point Fed hike by its March meeting. 

Earlier in the day, the ADP National Employment report showed private U.S. payrolls surged last month by more than double what economists polled by Reuters had forecast, potentially raising expectations for the non-farm payrolls numbers due Friday.  

“With odds for a rate hike in March rising and the threat of QT this year, the USD should maintain resilient form,” TD Securities strategists wrote in a report. 

 Full coverage: REUTERS 

Oil Falls From One-month High On OPEC+ Supply Plans, U.S. Fuel Inventory Surge 

Oil prices lost ground on Thursday, easing from their highest levels in more than a month as OPEC+ producers stuck to a plan to boost production and U.S. fuel stockpiles surged amid declining demand. 

The global benchmark Brent crude futures fell 87 cents, or 1.08%, to $79.93 a barrel, as of 0154 GMT. U.S. West Texas Intermediate (WTI) crude futures lost 62 cents, or 0.8%, to $77.23 a barrel. 

On Wednesday, both contracts climbed to their highest since late November. 

OPEC+, a group that includes members of the Organization of the Petroleum Exporting Countries, Russia and other producers, agreed on Tuesday to add another 400,000 barrels per day (bpd) of supply in February, as it has done each month since August. 

U.S. crude oil stockpiles fell last week while gasoline inventories surged more than 10 million barrels, the biggest weekly build since April 2020, as supplies backed up at refineries due to reduced fuel demand.  

Minutes from a U.S. Federal Reserve meeting that showed policymakers may have to raise rates more quickly than markets anticipated put additional pressure on oil prices. 

U.S. stocks slid and Treasury yields jumped on Wednesday after the meeting minutes were released. The minutes also indicated the Fed could reduce its overall asset holdings to tame high inflation. 

Full coverage: REUTERS 

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