NEW YORK The leading index Dow Jones Industrial fell after four consecutive days of gains by 1.72 percent to 32,856.46 points. The market-wide S&P 500 fell 1.53 percent to 3986.37 points. The Nasdaq 100 technology selection index fell 1.22 percent to 12,152.17 points.
“Recent economic data has been better than expected, so the rate peak is likely to be higher than previously thought,” Powell told the US Senate Banking Committee. “If the body of data suggests that faster tightening is warranted, we would be willing to increase the pace of rate hikes.” He also reiterated that further increases would be appropriate.
“The statements by the Fed chief increase the level of uncertainty about the development of US key interest rates in the coming months,” wrote analyst Elmar Völker from the Landesbank Baden-Württemberg. At the most recent interest rate meeting on February 1, the message seemed to have been relatively clear that “smaller” steps of 0.25 percentage points are now moving towards the ultimate target point. However, the unexpectedly robust start to the new year by the US economy and new doubts about a speedy relaxation of inflation have increased the pressure on monetary authorities to take action again.
With the exception of the pharmaceutical company Merck & Co, all shares in the Dow were in the red. Among financial institutions, Goldman Sachs and JPMorgan each fell three percent. The prospect of higher earnings in an environment of further rising interest rates did not help the banks. The fear of the negative consequences of higher interest rates for the economy as a whole prevailed, as investments and loans become more expensive in such an environment. This could stifle growth, which in turn limits the ability to service bank loans.
At the end of the Dow, shares in the drugstore and pharmacy chain Walgreens Boots Alliance lost 3.7 percent. California Gov. Gavin Newsom said the state would no longer do business with the company after it recently halted the sale of abortion pills in 20 Republican-run states.
At the bottom of the Nasdaq 100, Rivian shares fell 14.5 percent after hitting a record low during trading. The electric vehicle maker plans to raise $1.3 billion through the sale of “green” convertible bonds. The proceeds are to be used for financing, refinancing or for investments in current and future “green” projects.
On the foreign exchange market, the euro suffered from indications of further US interest rate hikes and was last listed at 1.0550 US dollars. The European Central Bank had set the reference rate at 1.0665 (Monday: 1.0646) dollars. The dollar thus cost 0.9377 (0.9393) euros.
Against this backdrop, short-dated bonds in particular came under pressure on the US bond market. In return, the yield on two-year government bonds rose by more than five percent and thus to the level of 2007. The futures contract for ten-year bonds (T-Note future) fell by 0.01 percent to 110.97 points. The return on ten-year government bonds was 3.97 percent./la/he
— By Lutz Alexander, dpa-AFX —