Major US indexes fall as Fed signals unlikelihood of March rate cut

US stocks declined on Wednesday following the Federal Reserve's decision to keep interest rates unchanged.

However, Federal Reserve Chairman Jerome Powell mentioned that the central bank was unlikely to consider rate cuts in March, highlighting the need for more positive data on inflation.

Still, the central bank did do something traders wanted, which is remove the part of the statement that signalled the central bank still had a tightening bias. The Fed removed a phrase that referred to “additional policy firming.”

Treasury yields fell on the day following the Fed’s statement with the 10-year Treasury yields cracking 4 per cent.

Wednesday’s session was markedly terrible for the major averages. It was the worst performance for the Dow since December. For the S&P 500, it was the worst day since September, and since October for the Nasdaq.

Overall, the Dow Jones Industrial Average fell 317.01 points, or 0.82 per cent to close at 38,150.30. The S&P 500 fell 1.61 per cent to 4,845.65. The Nasdaq Composite lost 2.23 per cent to finish the session at 15,164.01.

Shares of Alphabet dropped more than 6 per cent and were on pace for their worst day since Oct. 25 as disappointing ad revenue overshadowed better than expected earnings and sales. Peer tech names Microsoft and AMD slipped 1.5 per cent and 1.8 per cent, respectively, on lower-than-expected forward guidance after posting quarterly results.

Shares of Boeing climbed nearly 6 per cent following quarterly results that beat analyst estimates on the top and bottom line. The company has been plagued by recent issues tied to its 737 Max 9 which has pushed Boeing to focus on safety moving forward.

Turning to commodities, oil prices are poised to end their first monthly gain since September amidst heightened tensions between the U.S. and Iran in the Middle East, with West Texas crude falling by 2.27 per cent and Brent trading down 1.33 per cent.

Chinese investors and households turned to gold amid market volatility, boosting record prices, and making China a key driver of global gold demand in 2023, according to UBS analysts and the World Gold Council.

Meanwhile, Bank of America has reduced its lithium forecasts, expressing concern that operators are prioritising cost management over production cuts, leading to a 63.1 per cent decrease in its 2024 spodumene price forecast to $US650 a tonne and a 34 per cent drop in its 2025 forecast to $US1438 a tonne.

The US and European Union did not reach a trade deal for critical battery minerals, but they remain committed to pursuing negotiations aimed at establishing a transatlantic marketplace for minerals and other components. This agreement, sought to enable European companies to benefit from US. tax credits for electric vehicles, was a significant topic at the fifth ministerial meeting of the US-EU Trade and Technology Council.

Turning to US sectors, all sectors closed lower overnight. Communications fell hardest, closing lower by almost 4 per cent. Health recorded the fewest gains.

Futures

The SPI futures are pointing to a 1.1 per cent fall.

Currency

One Australian dollar at 8.20am was buying 65.68 US cents.

Commodities

Gold has gained 0.31 per cent. Silver has lost 0.71 per cent. Copper has fallen 0.51 per cent. Oil has lost 2.66 per cent.

Figures around the globe

European markets closed lower. London’s FTSE fell 0.47 per cent, Frankfurt lost 0.40 per cent, and Paris closed 0.27 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei gained 0.61 per cent, Hong Kong’s Hang Seng dropped 1.39 per cent and China’s Shanghai Composite fell 1.48 per cent lower.

Yesterday, the Australian share market closed 1.06 per cent higher at 7,680.72.

Figures around the globe

European markets closed lower. London’s FTSE fell 0.47 per cent, Frankfurt lost 0.40 per cent, and Paris closed 0.27 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei gained 0.61 per cent, Hong Kong’s Hang Seng dropped 1.39 per cent and China’s Shanghai Composite fell 1.48 per cent lower.

Yesterday, the Australian share market closed 1.06 per cent higher at 7,680.72.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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