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Tech shares buck trend as hawkish Fed weighs on global stock markets

EconomyJun 17, 2021 05:26PM ET
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2/2 © Reuters. FILE PHOTO: A man works at the Tokyo Stock Exchange after market opens in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon 2/2

By Chris Prentice and Marc Jones

WASHINGTON/LONDON (Reuters) -Wall Street was broadly under pressure on Thursday and European shares fell for the first time in two weeks on hawkish signals from the U.S. Federal Reserve, even as U.S. technology stocks notched gains.

The U.S. dollar hit a two-month high and long-dated Treasury yields whipsawed, tumbling after initially spiking on Wednesday's surprise move from the Fed to raise interest rates at a much faster pace than expected.

U.S. jobless claims unexpectedly rose, briefly lifting bullion prices off the session's steepest losses. Crude oil futures tumbled from multi-year peaks, under pressure from the dollar.

The Dow Jones Industrial Average closed lower for a fourth straight session, down 0.62%, as the S&P 500 slipped 0.04%.

The tech-heavy Nasdaq Composite neared its lifetime peak hit on April 29, before closing up 0.87% as investors bet the economic recovery would boost demand.

Shares of Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) all shrugged off pre-market losses.

Europe's STOXX 600 snapped a nine-day streak of gains - its longest since 2017 - with a 0.12% dip and MSCI's gauge of global stocks shed 0.41%.

The Fed on Wednesday signaled it would now be considering whether to taper its $120 billion-a-month asset purchase program meeting by meeting, and downgraded the risk from the pandemic given progress with vaccinations.

Traders are "again buying Treasuries and technology stocks as the market continues to believe that, despite yesterday’s Fed meeting, the central bank is still planning on keeping interest rates near zero or extremely low for another 18-24 months," said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance in Charlotte, North Carolina.

Two-year and five-year notes, the most sensitive to interest changes, saw the largest yield increases on the hawkish Fed move.

Long-dated yields dropped as traders who were betting on the yield curve scrambled to cover their trades. Yields on 10-year bonds matched Wednesday's high of 1.594% before retreating. [US/]

JPMorgan (NYSE:JPM) analysts noted Fed Chair Jerome Powell had not been as aggressive in his news conference. He had described it as a "talking about talking about meeting," a reference to his protestations earlier this year that the Fed was not even "talking about talking about" tighter policy.

"It appears that faster progress toward reopening and higher inflation surprises revealed some hawks on the FOMC, but we suspect that leadership is predominantly anchored at zero or one hike in 2023," JPMorgan said, sticking with a prediction for tapering to start early next year.

Some are beginning to expect the Fed to dial back purchases sooner. Bond giant Pimco's U.S. economists said the tapering plan might now be announced as soon as September, and that it would take roughly six to nine months to wind down the stimulus.

"The more hawkish changes to FOMC participants’ rate path expectations came despite little change in the 2023 unemployment rate and inflation forecasts," Pimco said, "This suggests less tolerance for an inflation overshoot than previously thought."

Increasingly confident in the U.S. economic recovery, the Fed is seen most likely starting to taper in January, according to a Reuters poll.

"Given another strong rise in the upcoming May core PCE data, July’s FOMC could well bring a very hawkish outcome to this talk, especially if nonfarm payrolls for June are over 1 million and prior months are revised up significantly," John Vail, chief global strategist at Nikko Asset Management, said in a market note.

DOLLAR BREAKS FREE

The dollar broke out of recent tight ranges, surging to a two-month high as it extended Wednesday's 0.9% increase against a basket of currencies. [FRX/]

Colombia's peso led Latin American currency losses on Thursday, dropping 1.5% on the dollar's strength. Brazil's real was the outlier, holding near one-year highs on expectations of more central bank policy tightening.

Powell's hawkish turn prompted both Goldman Sachs (NYSE:GS) and Deutsche Bank (DE:DBKGn) to abandon their calls that the U.S. currency would weaken against the euro, although others were not so sure.

Agnès Belaisch, chief European strategist of the Barings Investment Institute, said the fact that the Fed was not going to lift rates anytime soon was good for world growth and that FX markets would therefore get over Wednesday's shift.

"He (Powell) said they wouldn't do anything for the next two years, so it's a shock but wrapped in good news," Belaisch said. "I think he gave the markets the all-clear to rally."

The euro fell to $1.19035 from just over $1.20 in the Asian session after touching the lowest since mid-April.

Oil prices toppled from their highest levels in years on Thursday, pressured by the dollar's gains. The stronger dollar makes greenback-traded commodities more expensive to holders of other currencies. [O/R]

Brent retreated 1.7% to $73.10 a barrel by 4:26 p.m. EDT (2026 GMT), while U.S. crude fell 1.64% to $70.76.

Precious metals sold off on Thursday. Spot gold dropped 2.2%. U.S. gold futures settled down 4.6% at $1,773.80 an ounce after slumping to their lowest since late April.[GOL/]

Tech shares buck trend as hawkish Fed weighs on global stock markets
 

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Comments (16)
William Smith
William Smith Jun 17, 2021 7:19AM ET
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Hawkish? Hahahaha, another 1st grade Reuters headline.
Studd Muffin
FlipTicks Jun 17, 2021 5:48AM ET
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Its not hawkish when they wanna raise FF to .5-.75 in 2 years and they will keep continuing asset purchases. This market is stupid.
Darryl Allen
Darryl Allen Jun 17, 2021 4:32AM ET
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Weekly pump and dump. Friday will be all green after they slander the market all week long to get a discount.
john dislias
john dislias Jun 17, 2021 2:51AM ET
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Nothing happens to stocks . Ford , tell , aa ocgn , ual up
Kaveh Sun
Kaveh Sun Jun 17, 2021 2:22AM ET
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They spoke about raise interests for the first time in a long time. That freaks out lots of investors even they have no plan to raise it this year.
Steve Lora
Steve Lora Jun 17, 2021 2:14AM ET
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Biden economy is crumbling and Reuters cant save him
YouTube Account
YouTube Account Jun 17, 2021 1:28AM ET
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"we might raise rates two years from now" - "Hawkish" - who approves this garbage?
Izzy Hayat
Izzy Hayat Jun 17, 2021 1:28AM ET
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2022 is 2 years away now? lol
Darryl Allen
Darryl Allen Jun 17, 2021 1:28AM ET
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Izzy Hayat most of them said 2023
Jesse James
Jesse James Jun 17, 2021 1:28AM ET
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by leaving their comments vague there is less of a chance people will know they're phony....-Bobby Boucher Jr Lsu mudd dogs
perplexed76 .
perplexed76 . Jun 17, 2021 1:02AM ET
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in 2023? market gamblers must feel like *******
perplexed76 .
perplexed76 . Jun 17, 2021 1:02AM ET
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what's wrong with the word org*sm?
Jesse James
Jesse James Jun 17, 2021 1:02AM ET
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perplexed76 . because we're not adults anymore. too many kids in the financial world now.
Options Trader
Options Trader Jun 17, 2021 12:02AM ET
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Reuters cannot be classified as a news organization any longer. it's simply a fake propaganda machine. Not one person watching or listening would write this garbage.
Peter Agnes
Peter Agnes Jun 17, 2021 12:02AM ET
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spot on. garbage lying rats. 2023 is a long way away and the economy will be booming
Ominous Owl
Ominous Owl Jun 16, 2021 11:46PM ET
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Brought to you by Reuters. lmao.
Stan Smith
Stan Smith Jun 16, 2021 10:53PM ET
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There will be no tapering, there will be no rate hike and there will be some red flag excuse down the road to make sure none of this happens. Its just can kicking. There will however certainly be more inflation which was completely ignored by these fake and naive markets
Edward Chong
Edward Chong Jun 16, 2021 10:53PM ET
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haha u are very stubborn
Me comment
Me comment Jun 16, 2021 10:09PM ET
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The FED has been saying all along rates wouldn't increase until late 23 or 24 so whats all this baloney analyst are trying to hype about sudden change. Anything to make a quick buck on fictitious market swings.
James Greer
James Greer Jun 16, 2021 10:09PM ET
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you caught my thoughts exactly I keep forgetting how fickle and let's not beat around the bush how stupid the average trader is. how many times does it have to be said they aren't tapering and aren't changing rates. this meeting was nothing but talking about talking about changing policy it is ridiculous but it got the reaction someone was betting on I guarantee
Duncan McTaggart
Duncan McTaggart Jun 16, 2021 9:48PM ET
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Sudden hawkish turn??? What a foolish description.
robert mandry
Rob2Trade Jun 16, 2021 9:42PM ET
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You guys really need to get your act together if tou want to consider yourselves a serious and legitimaye news org. “The initial fallout in equities was not as bad with S&P 500 futures down just 0.2% in early Asian trade”You were gling off the level that futures were teading at 4:30. Between 4 and 4:30 they had already dropped 12 points. I mean geez, look at a *****chart before you “report” the market news.
milena villa escobar
milena villa escobar Jun 16, 2021 8:59PM ET
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Does Reporting get any worse than Reuters?  Seriously what a ridiculous headline.  Where in the world did they get that headline from the feds report today?
Mark Manley
Mark Manley Jun 16, 2021 7:47PM ET
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Much faster pace than assumed? "The end of 2023" was the prediction. 30 months from now. A good portion of your readers won't even be alive by then. Sheesh. Isn't it about time we started requiring journalists to learn basic math? Or how to report the truth instead of manipulating it.
 
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