Stocks end lower after hawkish Fed remarks

Stocks fell on Monday to give back some gains after last week’s advances, while energy prices resumed a march higher.

The S&P 500, Dow and Nasdaq traded lower Monday afternoon in a choppy session. The major indexes extended losses after Federal Reserve Chair Jerome Powell said the Fed would “adjust policy as needed” to bring down inflation, including by speeding up interest rate hikes if necessary. Treasury yields added to earlier gains across the curve, and the benchmark 10-year yield rose to near 2.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

Energy and commodity prices spiked amid the latest developments in Russia’s war in Ukraine. As of Monday, Ukraine refused to surrender its heavily attacked port city of Mariupol to Russian forces, while the civilian death toll across Ukraine climbed.

U.S. crude oil prices (CL=F) jumped more than 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} at session highs to top $112 per barrel, and Brent crude, the international standard, (BZ=F), rose to more than $116 per barrel. Aluminum, palladium and wheat prices each also gained Monday.

At the start of a relatively quiet week for corporate earnings results and new economic data, traders continued to mull the market implications of the Federal Reserve’s latest monetary policy decision against persistently elevated inflation and the ongoing war in Ukraine, which has exacerbated existing price pressures.

The Federal Reserve’s move last week to raise interest rates by a quarter-point and signal another six rate hikes later this year was met with an at least momentary rally in U.S. equities, with traders relieved to receive some clarity on the central bank’s monetary path forward after weeks of speculation. And the Fed also signaled the likely start of discussions and then implementation of quantitative tightening, or rolling assets off its nearly $9 trillion balance sheet.

“The key message to come from meetings of the Federal Reserve and Bank of England last week, and the European Central Bank the week before, was that the war in Ukraine has not deterred central bankers from their plans to tighten policy,” Neil Shearing, group chief economist for Capital Economics, wrote in a note. “In fact, both the Fed and the ECB delivered hawkish surprises.”

“The war has added to the squeeze on real incomes in advanced economies and caused a substantial tightening of financial conditions in Europe. But, for now, central banks remain focused on bringing down inflation and containing any second-round effects on wages and prices. This is, on balance, the correct judgement,” he added. “While the economic outlook is unusually uncertain, the high starting point for inflation – and the likelihood that it will rise further – justifies a tightening of policy.”

4:04 p.m. ET: Stocks end lower after hawkish Fed remarks: Dow drops 202 points, or 0.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Here were the main moves in markets as of 4:04 p.m. ET:

  • S&P 500 (^GSPC): -1.93 (-0.04{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,461.19

  • Dow (^DJI): -201.94 (-0.58{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,552.99

  • Nasdaq (^IXIC): -55.38 (-0.40{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 13,838.46

  • Crude (CL=F): +$7.77 (+7.42{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $112.47 a barrel

  • Gold (GC=F): +$7.30 (+0.38{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,936.60 per ounce

  • 10-year Treasury (^TNX): +16.7 bps to yield 2.3150{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

1:49 p.m. ET: Stocks drop after Powell remarks, Nasdaq sheds 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Here’s where markets were trading Monday afternoon:

  • S&P 500 (^GSPC): -24.29 (-0.54{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,438.83

  • Dow (^DJI): -334.60 (-0.96{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,420.33

  • Nasdaq (^IXIC): -158.86 (-1.15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 13,733.95

  • Crude (CL=F): +$5.18 (+4.95{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $109.88 a barrel

  • Gold (GC=F): -$0.40 (-0.02{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,928.90 per ounce

  • 10-year Treasury (^TNX): +14.7 bps to yield 2.295{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

12:33 p.m. ET: Powell says Fed will ‘adjust policy as needed’ to bring down inflation, preserve strong labor market

Federal Reserve Chair Jerome Powell said Monday that the central bank would continue to monitor incoming data and developments and “adjust monetary policy as needed” to bring down inflation while also keeping economic growth intact.

“As the outlook evolves, we will adjust policy as needed in order to ensure a return to price stability with a strong job market,” Powell said in a speech.

He also noted that “ongoing rate increases will be appropriate” to help bring inflation back toward the Fed’s target of 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. This was consistent with what the Fed telegraphed last week following its March meeting, wherein the median members’ forecast saw rates rising another six times this year.

9:30 a.m. ET: Stocks open slightly lower

Here’s where stocks were trading just after market open Monday morning:

  • S&P 500 (^GSPC): +7.29 (+0.16{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,470.41

  • Dow (^DJI): -10.66 (-0.03{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,744.27

  • Nasdaq (^IXIC): -16.46 (-0.12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 13,877.47

  • Crude (CL=F): +$4.05 (+3.87{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $108.75 a barrel

  • Gold (GC=F): -$6.60 (-0.34{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,922.70 per ounce

  • 10-year Treasury (^TNX): +8.9 bps to yield 2.237{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

8:51 a.m. ET: Fed’s Bostic sees six total rate hikes this year given ‘elevated levels of uncertainty’

Atlanta Federal Reserve President Raphael Bostic said Monday he saw the central bank raising interest rates a total of six times this year, representing a more dovish outlook than many of his peers offered in the Federal Open Market Committee’s latest Summary of Economic Projections (SEP).

Bostic, who is not a voting member this year on the FOMC, said in a keynote address Monday morning at the National Association for Business Economics Annual Policy Conference, that he “penciled in six rate hikes for 2022 and two more for 2023” in the Fed’s most recent SEP released last Wednesday.

“I recognize that I am toward the bottom of the distribution relative to my colleagues, but the elevated levels of uncertainty are front forward in my mind and have tempered my confidence that an extremely aggressive rate path is appropriate today,” Bostic said. “Events are shifting rapidly, and we could see marked changes along key dimensions, such as aggregate demand, that could warrant quickly adjusting the trajectory of policy.”

“Here the risks go both ways. Should demand falter in the face of economic uncertainty or removal of monetary policy accommodation, then the appropriate path may be shallower than I currently project,” he added. “But there are other developments, such as shifts in supply strategies, that could mean higher costs and thus motivate a steeper policy path than I expect.”

8:37 a.m. ET: Chicago Fed National Activity Index shows modest deceleration in economic growth in Feb.

The Chicago Federal Reserve’s monthly National Activity Index fell slightly more than expected in February, reflecting a moderate deceleration in U.S. economic growth.

The headline index ticked down to 0.51 for February, the Chicago Fed said Monday morning. This dropped for 0.59 in January, which was in turn revised slightly lower from the 0.69 previously reported. Readings of 0 are consistent with U.S. economic growth rates at the average historical trend, while readings above zero indicate growth.

Of the 85 monthly economic indicators comprising the index, 61 made positive contributions, while 24 detracted from the index during February.

8:20 a.m. ET: Boeing shares drop after 737 passenger jet crashes in China

Shares of Dow component Boeing (BA) fell Monday morning in pre-market trading after a passenger plane with more than 130 people on board crashed in China’s Guangxi province.

The Civil Aviation Administration of China confirmed the crash of the Boeing 737 jet, which was operated by China Eastern Airlines. The number of casualties following the crash remains unknown, and Chinese officials have dispatched a rescue team to the crash site.

Shares of Boeing dropped more than 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in early trading. The stock has fallen by 4.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the year-to-date through Friday’s close.

7:40 a.m. ET Monday: Stock futures mixed, Dow and Nasdaq head for slightly lower opens

Here’s where markets were trading heading into the opening bell Monday morning:

  • S&P 500 futures (ES=F): +2.25 points (+0.05{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,455.75

  • Dow futures (YM=F): -58 points (-0.17{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,575.00

  • Nasdaq futures (NQ=F): -1 point (-0.01{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 14,412.50

  • Crude (CL=F): +$4.55 (+4.35{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $109.25 a barrel

  • Gold (GC=F): -$2.80 (-0.15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,926.50 per ounce

  • 10-year Treasury (^TNX): +4.3 bps to yield 2.191{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

NEW YORK, NEW YORK - MARCH 16: Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2022 in New York City. The Dow started off the day in positive territory, extending yesterday's rally.  (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – MARCH 16: Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2022 in New York City. The Dow started off the day in positive territory, extending yesterday’s rally. (Photo by Spencer Platt/Getty Images)

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