U.S. stocks close mixed amid Fed rate hike expectations

  • World
  • Thursday, 08 Jun 2023

NEW YORK, June 7 (Xinhua) -- U.S. stocks ended mixed on Wednesday as investors worried that the Federal Reserve is not done with its tightening cycle.

The Dow Jones Industrial Average rose 91.74 points, or 0.27 percent, to 33,665.02. The S&P 500 fell 16.33 points, or 0.38 percent, to 4,267.52. The Nasdaq Composite Index shed 171.52 points, or 1.29 percent, to 13,104.90.

Six of the 11 primary S&P 500 sectors ended in green, with energy and real estate leading the gainers by rising 2.65 percent and 1.75 percent, respectively. Meanwhile, communication services and technology led the laggards by losing 1.87 percent and 1.62 percent, respectively.

U.S. stocks were mostly lower on Wednesday amid apprehension on the Federal Reserve's monetary policy decision next week. The Bank of Canada's unexpected decision to raise rates and resume its monetary tightening made investors feel worried about a similar situation in the United States.

"Stocks are declining after investors got spooked when the Bank of Canada (BOC) restarted their rate hiking campaign. Canada's central bank is viewed as one of the leaders when it comes to being proactive with monetary policy," said Edward Moya, senior market analyst at OANDA, a supplier of online multi-asset trading services.

"They were the first to raise rates in 2022 and then put them on hold earlier this year. The BOC is signaling that more rate hikes could come and that has everyone rethinking that the Fed will be done after the July hike," said Moya.

The Federal Open Market Committee (FOMC) has around 35 percent probability to raise the benchmark interest rate by 25 basis points at its meeting on June 14, according to data from the CME FedWatch Tool on Wednesday afternoon, up from around 20 percent one day ago.

There appears to be enough support on the FOMC for a pause at next week's meeting, but the statement and new projections will make clear that this is not the end of the hiking cycle, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics.

"We now expect rates to be raised again at the July meeting. And although we still think that falling inflation and weak GDP growth will convince the Fed to move to the side-lines soon, it is now likely to take until early next year for officials to be ready to start cutting again," said Hunter.

U.S. stocks finished mixed on Wednesday, with a sharp fall in the tech-heavy Nasdaq index. Investor sentiment has been boosted recently as the promise of artificial intelligence (AI) lifts technology stocks, which has led to some concerns over the sustainability of the hype for AI.

Investors are also weighing the implications of the debt ceiling deal and bracing for a flood of more than 1 trillion U.S. dollars of Treasury bills, with concerns that the Treasury Department's need to replenish cash might drain liquidity from the financial system and spark a new bout of volatility in financial markets.

Meanwhile, the U.S. Department of Commerce reported Wednesday that the U.S. international trade deficit jumped in April to a six-month high of 74.6 billion dollars, from 60.6 billion dollars in March, a trend that could result in trade being a drag on economic growth.

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