US stocks fall as Fed signals faster rate hikes

Image Credit: Reuters

NEW YORK: Stocks on Wall Street struggled on an ugly Wednesday afternoon, falling sharply after the Federal Reserve’s meeting minutes indicated that officials were ready to raise interest rates sooner than expected to combat rising inflation.

Despite data showing strong private-sector hiring in the US in December, sentiment worsened sharply after the Federal Reserve released minutes of its December policy meeting which showed central bank governors saying “an increase in the fed funds rate may be justified at a time when closer or faster than the participants. It was expected earlier.”

Markets rallied during the COVID-19 pandemic after the Federal Reserve slashed interest rates to zero, and the tech sector especially thrived from easy money policies.

While Fed officials forecast last month that they expect up to three interest rate increases in 2022, the minutes showed they are ready to act more aggressively to combat inflation, which could tighten corporate terms.

All three major US indexes fell sharply, led by the tech-rich Nasdaq, which fell 3.3 percent.

Elsewhere, European indices generally rose while oil prices rose strongly after their gains on Tuesday, when OPEC and its allies agreed as expected to raise production by 400,000 barrels per day in February.

Asian markets were under pressure. Chinese technology companies, which have come under a crackdown from Beijing, have burdened Hong Kong with more than one per cent sank.

Concerns about the outbreak of the new Covid virus in the city, which led to the re-imposition of containment measures, increased to the gloomy mood.

Shares in Shanghai also fell, but Tokyo clung to positive territory.

In company news, China Mobile rose briefly by about 10 percent when it debuted in Shanghai after the New York telecom giant was delisted following a showdown between Beijing and Washington. However, it ended up with only a slight rise.

The stock offering is expected to raise $8.8 billion after the company exercised its over-allocation option, according to Bloomberg News, making it the largest in China’s domestic stock markets in more than a decade.