© Reuters. FILE PHOTO: Monitors displaying stock index prices and the Japanese yen exchange rate against the US dollar are seen at the Tokyo Stock Exchange in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato/File photo
by Stephen Culp
NEW YORK (Reuters) – U.S. stocks fell, the greenback jumped and Treasury yield inversion hit their highest level in more than four decades on Tuesday as Federal Reserve Chairman Jerome Powell held his semi-annual, two-day monetary policy. Concluded the first day of the policy. Testify before Congress
All three major US stock indexes lost more than 1% near a broad risk-on close session as investors digested Powell’s prepared remarks and answers to questions from the Senate Banking Committee.
The dollar jumped, and divergence between short- and long-term Treasury yields eased and crude oil prices eased as the US central bank chief reiterated the Fed’s determination to hold inflation to its 2% target rate. to be confirmed.
“It’s a pretty classic risk-on day,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. The combination of “(Powell) saying that the pace of rate hikes could accelerate and the terminal rate would probably have to be adjusted upwards was enough to reduce riskier assets.”
In his testimony, Powell affirmed that the recent spate of generally strong economic data, especially in the labor market, along with a slowing of inflation, raise the likelihood that the Fed will raise its policy rate more aggressively. will increase from
At last look at the conclusion of the central bank’s March meeting, financial markets have priced in a 70.5% chance of a 50 basis point increase in the federal funds target rate, according to CME’s FedWatch tool.
Graphic: Odds rise for big Fed rate hike in March
Shares fell 574.98 points, or 1.72%, to 32,856.46, fell 62.05 points, or 1.53%, to 3,986.37 and fell 145.40 points, or 1.25%, to 11,530.33.
European shares extended their losses after Powell’s prepared remarks, raising concerns about a rate hike.
“The world is worried that the Fed raising rates so high and for so long that the US could be headed for a recession,” said Tim Ghrisky, senior portfolio strategist at Ingalls & Snyder in New York.
The pan-European index declined 0.77% and MSCI’s broadest measure of stocks across the globe was down 1.46%.
Emerging market shares declined 0.87%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.81% lower, while rising 0.25%.
Benchmark Treasury yields fell following Powell’s comments and the inversion between the 2-year and 10-year Treasury yields, a harbinger of a possible recession, sank. It was last widened in 1981.
The benchmark 10-year note rose to 3.9696% from 3.983% on Monday.
The 30-year bond last rose 18/32 to yield 3.8794% from 3.912% on Monday.
The greenback rose, hitting its highest since early January against a basket of world currencies, as Powell signaled the Fed may step up its efforts to rein in inflation.
The euro rose 1.22% to $1.0548, down 1.21%.
The Japanese yen weakened 0.88% versus the greenback at 137.16 per dollar, while sterling was last trading at $1.1825, down 1.63% on the day.
Oil prices fell more than 3% on a stronger dollar and concerns about a slump in demand.
fell 3.58% to $77.58 a barrel and fell 3.35% to $83.29 on the day.
Gold declined against the strength of the dollar. fell 1.8% to $1,814.48 an ounce.