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Wall Street dives, dollar jumps as rate hikes take spotlight

Economy Apr 22, 2022 04:32PM ET
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2/2 © Reuters. FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan's Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon 2/2

By Pete Schroeder

WASHINGTON (Reuters) -U.S. stocks tumbled on Friday while the U.S. dollar hit a more than two-year high as investors prepared for a bevy of interest rate hikes in a global inflation fight.

All three major Wall Street indices ended down more than 2% a day after Federal Reserve Chairman Jerome Powell indicated that the U.S. central bank was preparing a half-point interest rate hike at its May meeting, with more to come.

The Dow Jones Industrial Average closed down 2.82%, while the S&P 500 lost 2.77% and the Nasdaq Composite dropped 2.55%.

The MSCI world equity index, which tracks shares in 45 nations, fell 2.46%.

Powell drove headlines on Thursday by saying a 50 basis point rate hike is "on the table" at the Fed's next meeting, adding that it "is appropriate to be moving a little more quickly" to combat inflation.

"Markets are very uneasy about the growing likelihood of a policy error by the Federal Reserve. When a Fed official suggests a 50 basis points hike, markets immediately start trying to price in 75 basis point hikes," said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.

The prospect of aggressive hikes was a boon to the U.S. dollar, which surged to a more than two-year high on Friday. The dollar index, which tracks the greenback versus a basket of six currencies, was last up 0.6% to 101.18, clearing levels not seen since March 2020.

The dollar's surge took a toll on fellow safe-haven gold, with spot gold prices falling 0.9% to $1,933.94 an ounce.

Yields on U.S. Treasury bonds were also on the uptick as traders prepared for higher rates, with short-dated bonds hitting three-year highs in Friday trading.

Two-year note yields, highly sensitive to interest rate moves, rose to 2.789%, the highest since December 2018, before dipping lower to 2.697% in the afternoon. Benchmark 10-year yields were last at 2.899%, after reaching 2.981% on Wednesday, also the highest since December 2018.

"We're repeating the same message from central bankers, and every time each repetition ratchets short interest rates higher," said Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee.

Oil was down on the week, as concerns of looming interest rate hikes, weaker global growth and COVID-19 lockdowns in China hurting demand outweighed a potential European Union ban on Russian oil that would tighten supply. [O/R]

Brent crude fell 2% at $106.16 a barrel, while U.S. West Texas Intermediate (WTI) crude declined 2.03% to $101.69 a barrel.

Wall Street dives, dollar jumps as rate hikes take spotlight
 

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Comments (5)
Alan Rice
Alan Rice Apr 23, 2022 12:11PM ET
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My calculator says The markets drop 1% per ten year Treasury Bill basis point. Invest at your own risk.
Ella Yassin
Ella Yassin Apr 22, 2022 5:22PM ET
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Good news for USA at least the sanction heat in returned..
siba patel
siba patel Apr 22, 2022 12:26AM ET
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do you think market depends on rate hike this much. For last 6 month when there is a correction only reason you found id rate hike, really you all making fool of rest. Rate hikes are natural and dynamic , but at the end it's the growth of economy that decide market and rate hike
Sam Jennings
Sam Jennings Apr 22, 2022 12:07AM ET
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Democrats are literally crashing the global economy.  First they spent taxpayer money, wastefully, until the country went into deep debt. Then they printed money to compensate. Then they created covid, to shut down Trump, who had a record legacy with the stock market. Then they closed business across the country, which harmed production, and left fewer goods to buy. Then they wrecked the supply chains, with their draconian trucker restrictions, and unconstitutional shot requirements... illegally requiring people to get shots, violating USC 241 Conspiracy Against Rights. Meanwhile, of course, they left the borders open to illegal alien welfare grifters and job thieves, and did NOT require THEM to get shots. Now they are raising interest rates, crashing the economy, in order to manipulate the USD, to make it seem like less of a mass-printed trash currency.  Of course: They will just borrow to pay that interest, further eroding value... this time with less tax base, after they crash the market.
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Jo Riley
Jo Riley Apr 22, 2022 12:07AM ET
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Jay Willams  Powell was accepted, approved, applauded, and confirmed again to his post by the Biden gang.  Trump, the poor hirer that he was, was often frustrated with Powell - he definitely didn't follow all what the Republicans wanted.
Mark Jannetty
Mark Jannetty Apr 22, 2022 12:07AM ET
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the only thing I think you missed is, we have a bumbling puppet that 💩 his pants
Mark Jannetty
Mark Jannetty Apr 22, 2022 12:07AM ET
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the only thing is that the puppet was holding his job security over his head. would you do the right thing, if you would be fired? dont think so. that's why he has to be aggressive now
Sam Jennings
Sam Jennings Apr 22, 2022 12:07AM ET
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Jay Willams  You are desperately cherry picking.  Powell is trying to compensate for what Democrats never should have done... a man against his own principles, because the 'crats are twisting his arm.  Look at the larger picture before you criticize this ONE person.
Sam Jennings
Sam Jennings Apr 22, 2022 12:07AM ET
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Meanwhile, ofc, there are RINO's, too.  If Powell is giving the 'crats too much of what they want, then maybe he is actually more of a Democrat, on the inside.
Khalid King
Khalid King Apr 22, 2022 12:05AM ET
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