Confidence in the strength of the economic recovery prompted investors to seek US technology shares Thursday, which lifted the Nasdaq index, but the consequences of comments from the Federal Reserve weighed on the S&P index.
The Dow recorded the fourth loss at the close in a row, as investors are still evaluating the Federal Reserve’s message, which came tough, contrary to expectations regarding monetary policy from the previous day, which included the expectation of the first post-pandemic interest rate hike in 2023.
Federal Reserve officials pointed to an improving economic outlook with the US economy recovering quickly from the pandemic, and overall growth is expected to reach 7 percent this year. While being careful not to derail the recovery – with no end in sight for supportive policy measures such as bond buying – the hint of a rate hike highlights concerns about inflation.
Briefly during the session, the Nasdaq advanced just 16 points from its all-time high on April 29, before pulling back a bit.
The Dow Jones Industrial Average fell 209.96 points, or 0.62 percent, to 33,823.71 points, the Standard & Poor’s 500 index closed down 1.76 points, or 0.04 percent, to 4221.94 points, and the Nasdaq Composite Index fell 121.67 points, or 0.87 percent, to 14,161.35 points.
The reserve indicated that the economic outlook has improved, as it is expected that economic growth in total will reach seven percent this year.
With inflation rising faster than expected and the economy’s rapid recovery, the market was looking for indications about when the council might change the policies it adopted last year in the face of the economic repercussions of the pandemic, including the massive bond-buying program.
The Federal Reserve stressed his pledge to wait for “more significant progress” before starting to switch to policies less related to the pandemic and to wait more until the economy is fully opened. It also kept its short-term key interest near zero and said it would continue to buy $120 billion in bonds each month to support the economic recovery.
European shares fell on Thursday from record highs, tracking Wall Street slumps after the US Federal Reserve surprised investors by suggesting it might start scaling back its massive stimulus earlier than expected.
The pan-European STOXX 600 index fell 0.4 percent by 0705 GMT, ending a nine-day winning streak, while mining, utilities and technology sectors led the decline.
And futures contracts for the Standard & Poor’s 500 fell about 0.3 percent, a day after the US benchmark lost half a percent, following statements from the US Central Bank that it may start raising interest rates in 2023, a year earlier than expected.
The Fed’s tone on pandemic-era tightening differs markedly from the European Central Bank’s stance last week, when it stated that it was too early to discuss turning off the money taps despite the recent spike in inflation.
Biotech CureVac plunged 50 percent after the German company said late on Wednesday that its COVID-19 vaccine had missed a key target in the last phase of trials, raising doubts about the potential delivery of hundreds of millions of doses to the European Union.
Japanese shares closed lower on Thursday as investors sold shares of technology and drug makers following a weak Wall Street shutdown after the US Federal Reserve signaled earlier-than-expected interest rate increases, while the financial sector shone as US Treasury yields rose.
The Nikkei index closed down 0.93 percent to 2,9018.33 points, while the broader Topix index fell 0.62 percent to 1963.57 points.
And all three major indices on Wall Street fell in the previous session after the US Central Bank revealed its expectation that the first interest rate increase after the Corona virus pandemic will be in 2023, a year earlier, given the improvement of the health situation in light of the distribution of anti-virus vaccines.
The share of the investment company in emerging companies, SoftBank Group, fell 1.4 percent and contributed to the largest decline in the Nikkei index, followed by the share of the medical services platform m3 that fell 3.61 percent. Sony Group shares pressured Topix, down 2.34 percent.
Insurance companies and banks advanced, with T & D Holdings gaining 3.11 percent, topping the list of gainers over the Nikkei. Dai-ichi Life Holdings shares rose 2.54 percent.
Mitsubishi UFJ Financial Group added 1.18 percent, and Sumitomo Mitsui Financial Group gained 0.84 percent.
Toshiba, which is in crisis over corporate governance, added 1.26 percent after the Wall Street Journal reported that the chairman may step down after changes to the board of directors and the appointment of a new CEO. (agencies)