4.05pm: Equities rebound after a two-day selloff
US stocks finished the trading session higher, ending two days of Federal Reserve-induced selling.
At the close, the Dow rose 88 points to 34,584, while the S&P 500 added 19 points at 4,500 and the tech-heavy Nasdaq gained 9 points to 13,897.
Notable movers included shares of HP Inc (NYSE:HPQ), which surged more than 15% after a SEC filing revealed that Warren Buffett's Berkshire Hathaway recently took an 11% stake in the personal computer and printer company.
1.20pm: US stocks lose ground
US stocks fell heavily in afternoon trading, extending a selloff into its third session, as investors digested the possibility of more aggressive monetary tightening by the Federal Reserve and monitored the war in Ukraine.
The tech-dominated Nasdaq extended declines to 1% in midday trading, falling to its lowest level since March 21. Meanwhile, the S&P 500 fell 0.5%, and the Dow Jones Industrial Average shed 200 points.
Significantly, nine of the S&P’s 11 sectors were in the red. All three major U.S. indexes were on track to lose more than 1% this week.
In Treasury markets, the yield on the 10-year US Treasury note traded around 2.650%, up from 2.606% on Wednesday.
Investors this week have been selling riskier assets as the Federal Reserve details its new, more hawkish monetary policy.
“Last night’s Fed minutes have recommitted the central bank to its path of tightening policy, leaving equities vulnerable in the short term after the bounce from the March lows,” said Chris Beauchamp, chief market analyst at online trading platform IG. “While the economy continues to grow, there is a clear lack of bullish momentum in this market at the moment.”
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9.45am: US shares start mixed
US shares started mixed on Thursday after falling for two days in a row as the unease continues about the Fed's ever tightening monetary policy stance.
The Dow Jones Industrial Average shed around 154 points at 34,342, while the S&P 500 shed around four at 4,476. The technology laden Nasdaq index advanced around 28 points to stand at 13,917.
Yesterday, the Federal Reserve released the minutes from its March meeting, which showed it plans to reduce the central bank's bond holdings with a consensus amount of around $95 billion.
Policymakers also indicated that one or more 50 basis-point interest rate hikes could be warranted to battle surging inflation.
Charlie Ripley, senior investment strategist at Allianz Investment Management, was reported as saying: "The minutes from the latest FOMC meeting portray a higher level of urgency than previous communication as the Fed has circled on a commitment to run the balance sheet down faster than market participants may have expected."
6.30am: US stocks seen opening flat
US stocks are poised to open flat on Thursday following the release of conversations from the Federal Reserve’s March meeting, which solidified expectations that the policymaker will aggressively tighten its monetary policy as early as next month.
Stock and bond markets reacted negatively to the hawkish tone of the latest FOMC minutes, with the three major US indices closing near to or below their technical averages on Wednesday.
Futures for the Dow Jones Industrial Average were up 0.1% in pre-market trading, while those for the S&P 500 were up 0.3% and contracts for the tech-heavy Nasdaq-100 rose 0.6%.
“The FOMC minutes gave the clarity that every investor was looking for: the Federal Reserve will be scaling back its near US$9 trillion balance sheet by US$95 billion per month, more than a trillion dollars per year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Details of the Fed’s March meeting also showed most officials in agreement that “one or more 50 basis-point increases in the target (interest rate) range could be appropriate at future meetings, particularly if inflation measures remained elevated or intensified".
“Equity and bond prices must go lower if the Fed wants to counter the supply-side inflation by a demand-side cooldown,” Ozkardeskaya said, adding that the threat of a recession in the world’s largest economy "is real".
Deutsche Bank has forecast a recession in the US next year, with their economists David Folkerts-Landau and Peter Hooper expecting the Fed to reduce its US$8.9 trillion balance sheet by almost US$2 trillion by the end of next year, equivalent to three or four additional twenty-five basis-point hikes in the federal funds rate.
Adding to the economic woes are developments in the war in Eastern Europe, where markets will monitor the impact of a fresh round of sanctions by the US on Wednesday that included a ban on American investments in Russia.
Contact the author at stephen.gunnion@proactiveinvestors.com