Investing.com – Wall Street continued to lose heart on Thursday, turning negative year-to-date, with positive earnings news from major blue-chip companies unable to wash away the bearish tone instilled by a Federal Reserve (Fed) that gave indications that it was ready to continue with the normalization of monetary policy.
At 16:08GMT or 12:08ET, the Dow 30 tumbled 126 points, or 0.72%, while the S&P 500 shed 13 points, or 0.62%, and the tech-heavy NASDAQ Composite traded down 37 points, or 0.86%.
A day after markets were surprised by the hawkish tone in the Fed’s meeting minutes that made clear that the possibility of a rate hike in June was still in the cards, a couple of Fed officials continued the hawkish tone on Thursday.
Richmond Fed president Jeffrey Lacker, well known for his hawkish stance but a non-voter this year, blamed the markets on Thursday for overestimating the length of the pause that the U.S. central bank would take before continuing to tighten monetary policy and insisted that there was a strong case for raising the rates in June.
New York Fed president William Dudley later agreed that it was “reasonable” to expect an increase in either June or July depending on the evolution of economic data.
Fed vice chair Stanley Fischer steered clear of monetary policy barely hinting in a prepared speech that “what we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth”.
The US Dollar Index continued at a seven-week peak as markets readjusted their forecasts for the future path of monetary policy.
Fed fund futures last discounted a 30% probability of a hike for the June 15 meeting, compared to last week’s 4%, while July now seems a likely candidate for the increase with the odds at 52%.
On the economic front, all the more important now that the minutes made it blatantly clear that the Fed was focusing its decision based on the economy’s evolution, weekly jobless claims dropped less-than-expected.
Meanwhile, the Philadelphia Fed manufacturing index showed a second consecutive surprise contraction in May.
In positive company news, Wal-Mart (NYSE:WMT) soared almost 9%, leading the gainers on the Dow, as the world’s largest retailer presented first-quarter earnings that crushed expectations.
Cisco Systems Inc (NASDAQ:CSCO) jumped close to 4%, the second largest advance on the blue-chip index, after the network equipment maker reported a bigger-than-expected quarterly profit.
Monsanto (NYSE:MON) surged more than 5% on an unsolicited acquisition offer from Bayer.
In other big earnings movers outside the Dow, Urban Outfitters (NASDAQ:URBN) popped more than 11%, Dick’s Sporting Goods Inc (NYSE:DKS) jumped close to 10% and Salesforce.com (NYSE:CRM) gained 4%, while on the downside L Brands (NYSE:LB) slumped more than 4% after cutting its full-year forecast.
Gap Inc (NYSE:GPS), Applied Materials (NASDAQ:AMAT) or Autodesk (NASDAQ:ADSK) were slated release their own numbers after the market close.
Meanwhile, oil prices fell sharply as a broadly stronger U.S. dollar and an unexpected rise in U.S. crude inventories triggered selling.
U.S. crude futures dropped 0.85% to $47.78 a barrel by 16:13GMT, or 12:13AM ET, while Brent oil traded down 0.92% to $48.48.