Fed Rate Hike Warning Leads to Decline in NY Stock Market, US Treasuries, and Gold (Summary)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market closed lower amid expectations that the Federal Reserve (Fed) will accelerate interest rate hikes. U.S. Treasury yields rose and gold prices plunged, causing significant turmoil in capital markets not only in the U.S. but worldwide.

On the 16th (local time), the Dow Jones Industrial Average fell 265.66 points (0.77%) to close at 34,033.67, the S&P 500 dropped 22.89 points (0.54%) to 4,223.70, and the Nasdaq Composite declined 33.17 points (0.24%) to finish at 14,039.68.

Major indices on the New York stock market all declined after the Fed released the dot plot indicating two interest rate hikes in 2023.

Although the losses widened during the session, Fed Chair Jerome Powell urged not to blindly trust the dot plot, which somewhat reduced the sell-off. He explained that the dot plot represents "the views of individual members, not a concrete plan."

The 10-year Treasury yield surged vertically from the 1.4% range to 1.559% just before the FOMC meeting results were announced. In particular, the 2-year yield, which is sensitive to monetary policy changes, reached 0.203%, marking its highest level since June 16, 2020. Rising Treasury yields imply falling bond prices.

The rise in Treasury yields also pushed up the dollar index, which reflects the dollar's value against major currencies. With the anticipation of rate hikes, gold prices plunged by 2%.

Typically, rising Treasury yields hurt tech stocks, but Apple and Amazon closed higher. Alphabet and Facebook ended the day lower.

Tesla's stock price rose 0.9%. Cryptocurrency exchange Coinbase fell 1.7%. Cryptocurrencies Bitcoin, Ethereum, and Dogecoin dropped 3%, 4%, and 2%, respectively.

Metaverse company Roblox attracted attention by falling 8% amid concerns over earnings declines due to reduced economic activity. Casino and airline stocks showed strength again on expectations of increased travel.