[New York Stock Market] Powell Says "No Consideration for Rate Cut," Markets Fall Together... Nasdaq Down 0.76%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower on the 14th (local time) following a more hawkish-than-expected Federal Reserve (Fed). The Fed, which has entered a phase of slowing the pace of tightening, clearly signaled that it will continue raising the benchmark interest rate next year, dampening market expectations for a pivot.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,966.35, down 142.29 points (0.42%) from the previous session. The S&P 500, focused on large-cap stocks, fell 24.33 points (0.61%) to 3,995.32, while the tech-heavy Nasdaq dropped 85.93 points (0.76%) to close at 11,170.89.

By sector, all 10 S&P 500 sectors except healthcare declined. Among healthcare stocks, vaccine makers Moderna (+5.78%) and Pfizer (+2.66%) notably rallied. Conversely, sectors sensitive to interest rate hikes such as real estate, technology, communication, and financials experienced declines.

Among individual stocks, Tesla fell 2.58% after Goldman Sachs downgraded its target price. Charter Communications dropped 16.38% following news of a $5.5 billion investment plan over three years to upgrade its high-speed internet network. Fintech company SoFi Technologies rose 6.09% on news of its CEO buying company shares.

The New York stock market, which started higher awaiting the December Federal Open Market Committee (FOMC) meeting results, turned downward after the statement was released at 2 p.m. The Fed raised the federal funds rate by 0.5 percentage points from 3.75-4.0% to 4.25-4.5% in its last FOMC meeting of the year. As initially signaled, it stepped back from an unusual four consecutive giant steps (0.75 percentage point hikes) and began slowing the pace of tightening.

However, the dot plot released alongside showed the year-end rate forecast for next year was raised to 5.1%, leading to assessments that the Fed was more hawkish than expected. Following this, Fed Chair Jerome Powell expressed concern at a press conference about "broad inflationary pressures across goods and services," causing the three major indices to briefly hit intraday lows. Powell confirmed that tightening would continue next year and clearly ruled out rate cuts in 2023, stating, "We are not considering rate cuts yet."

This dashed market hopes for a pivot. Jason Pride, Chief Investment Officer at Glenmede Private Wealth, said, "Investors hoping for hints of a Fed pivot were likely disappointed by a statement that was virtually unchanged from November," adding, "The Fed is signaling no plans to pause rate hikes." Gina Volbin, Chair of Volbin Wealth Management Group, noted that investors did not see the same hope for signs of easing inflation as they did the previous day, saying, "The Santa rally hopes have been crushed. Powell appeared as the Scrooge of 'Christmas Carol,' putting coal in investors' stockings with his hawkish tone."

In the New York bond market, Treasury yields rose. The 2-year U.S. Treasury yield, sensitive to monetary policy, increased from 4.229% to 4.245%. The 10-year yield also rose to 3.503%.

Meanwhile, the dollar weakened. The Dollar Index, which measures the dollar's value against six major currencies, fell more than 0.3% to the 103 level.

Economic indicators released on the day were positive. Following the November CPI released the previous day, November import prices also came in below expectations. According to the U.S. Department of Labor, the import price index for November fell 0.6% from the previous month.

Oil prices rose for the third consecutive trading day due to the International Energy Agency (IEA) raising its demand forecast and the weaker dollar. On the New York Mercantile Exchange, January West Texas Intermediate (WTI) crude oil prices closed at $77.28 per barrel, up $1.89 (2.51%) from the previous session.