Stocks fall as Fed shock halts global rally: Markets pull back

(Bloomberg) – U.S. stock index futures and European stocks fell after the Federal Reserve pushed back on expectations of a dovish tilt and said interest rates would rise for longer.

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Contracts on the S&P 500 and Nasdaq 100 gauges fell at least 0.9% each. Demand for safe-haven assets pushed the dollar and Swiss franc higher amid a wave of rate hikes from Taiwan to Norway. The British pound extended its losses after an expected half-point rate hike by the Bank of England. The euro fell ahead of the European Central Bank’s decision. Tesla Inc. fell in premarket trading in New York after Elon Musk sold $3.6 billion worth of stock.

A global recovery sparked by weaker-than-expected U.S. inflation came to an abrupt halt on Wednesday after policymakers signaled a record rate well above market expectations and sought to dispel hopes of a rate cut next year . Chairman Jerome Powell reiterated that the central bank would not back down in its fight against inflation despite growing fears of job losses and recession.

“The Fed has been more hawkish than markets expected,” Jack McIntyre, fund manager at Brandywine Global Investment Management, wrote in a note. “They always seem to want financial markets to tighten further, which basically means they want lower stock prices.”

An index of dollar strength headed for the biggest gain since Dec. 5. The euro fell from a six-month high as the ECB was expected to follow the Fed with a half-point hike. The pound extended its losses after policymakers in London announced an expected rise, but growing divisions were noted in their decision.

The Swiss franc maintained its gain after the country’s central bank doubled the key rate to 1% as expected. The Chinese yuan fell as poor economic data and a rise in Covid cases weighed.

The European equity benchmark, the Stoxx 600, fell the most since Oct. 7 on a closing basis. Tesla fell 1.7% in early trading in New York after CEO Musk sold nearly 22 million shares of the electric car maker for $3.58 billion. Western Digital Corp. fell 4.8% as Goldman Sachs Group Inc. recommended selling the stock.

Short-term Treasury yields rose slightly, with the two-year rate adding 1 basis point. The 10-year rate was little changed as investors weighed the economic impact of Fed policy.

Oil fluctuated between gains and losses after rising nearly 9% in the previous three sessions as TC Energy Corp. restarted a section of the Keystone pipeline, allowing some flows to resume on the mainline.

Key events this week:

  • ECB rate decision and briefing from ECB President Lagarde, Thursday

  • Tariff decisions for UK BOE, Mexico, Norway, Philippines, Switzerland and Taiwan, Thursday

  • U.S. cross-border investment, trading stocks, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday

  • Eurozone S&P Global PMI, CPI, Friday

Some of the major movements in the markets:


  • S&P 500 futures fell 0.9% at 7:01 a.m. PT

  • Nasdaq 100 futures fell 1.2%

  • Dow Jones Industrial Average futures fell 0.7%

  • The Stoxx Europe 600 fell 1%

  • The MSCI World index fell 0.5%


  • The Bloomberg Dollar Spot Index rose 0.6%

  • The euro fell 0.6% to $1.0619

  • The British pound fell 0.9% to $1.2314

  • The Japanese yen fell 0.8% to 136.59 per dollar


  • Bitcoin fell 0.6% to $17,722.3

  • Ether fell 1.5% to $1,290.5


  • The yield on 10-year Treasury bills fell one basis point to 3.46%

  • Germany’s 10-year yield was little changed at 1.95%

  • The UK 10-year yield fell nine basis points to 3.23%


  • West Texas Intermediate Crude Little Changed

  • Gold futures fell 1.7% to $1,788.40 an ounce

This story was produced with assistance from Bloomberg Automation.

–With help from Richard Henderson and Georgina Mckay.

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