Investing.com – U.S. stocks traded down as the hawkish trend in comments from the Federal Reserve (Fed) continued on Wednesday and investors watched oil slump as inventories managed the second-largest buildup in a year and hopes for an impact from a production freeze were put into question.
At 16:14GMT or 12:14ET, the Dow 30 traded down 39 points, or 0.22%, while the S&P 500 fell 7 points, or 0.34%, and the tech-heavy NASDAQ Composite lost 35 points, or 0.73%.
Ever since the beginning of the week, the Fed hawks have been increasing their voice as first San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said in separate news reports on Monday that a rate hike could come as early as next month.
Then late on Tuesday, Philadelphia Fed President Patrick Harker said that the central bank should consider another interest rate hike as early as next month and added to the hawkish tone by stating that he would prefer at least three hikes before year-end.
The dollar reacted hitting a one-week high, even as St. Louis Fed President James Bullard took up the hawkish tone on Wednesday by saying another strong jobs report showing a firming labor market “could probably make a case for moving in April”.
Bullard’s comments may hold more sway with markets since he forms part of the Federal Open Market Committee (FOMC) ) and thus holds voting rights on policy decisions this year.
Fed fund futures still price in the first increase in interest rates occurring in September, though speculation runs across the board with some experts still betting on three hikes this year and others questioning if there will even be one.
Complicating the situation are what have been dubbed “misinterpretations” of the Fed’s own projections of the future path of rate hikes, known as the dot plot.
“I’ve even thought about dropping out unilaterally from the whole exercise,” Bullard said on Wednesday.
At the same time, former Minneapolis Fed president Narayana Kocherlakota referred to the dot plot and wrote in a Bloomberg op-ed that “investors and the media consistently misinterpret it”.
Kocherlakota explained that the dot plot does not reflect officials’ interest-rate forecasts, but “rather, it shows what each participant thinks the Fed should do, based on his or her individual forecast of how the economy will evolve and what the optimal response would be”.
Amidst all the speculation, investors might do well to remember that Fed chair Janet Yellen insisted in her post-decision press conference that every meeting of the U.S. central bank should be "live" and that opposition was already shown by Kansas City Fed president and FOMC voting-member Esther George when she dissented on the latest decision due to her preference to increase rates by 25 basis points.
Meanwhile, oil prices also maintained the market’s attention as bearish news on black gold continued to flow.
The U.S. Energy Information Administration reported on Wednesday that crude stockpiles increased by a whopping 9.357 million barrels, the second-largest buildup in a year and far outstripping forecasts for an increase of 3.090 million barrels.
That data came on top of the already bearish sentiment provoked by the American Petroleum Institute’s own inventory data released after the market close on Tuesday and an International Energy Agency report that suggested that an April 17 meeting among major oil producers to discuss a production freeze could be “meaningless”.
Crude oil futures on the New York Mercantile Exchange lost 3.23% to $40.11 a barrel by 16:16GMT or 12:16ET, while Brent oil fell 2.66% to $40.68.
On the data front, February new home sales rebounded from January’s sharp decline, with the total number of units sold topping the consensus forecast. The year-on-year data painted a bleaker picture of the U.S. housing market with its largest annual drop, 6.1%, since June 2014.
In company news, Nike (NYSE:NKE) was hard hit in Wednesday’s, falling almost 4%, after reporting earnings after Tuesday’s market close.
General Mills (NYSE:GIS) edged up 0.4% after beating on profit but missing on revenue in its own quarterly report.
Lastly, AutoZone Inc (NYSE:AZO) advanced 1.5% after increasing its stock repurchase program by $750 million.