Traders are bracing for the possibility of more aggressive policy tightening by the United States Federal Reserve.
U.S. stocks slid as the selloff in Treasuries resumed, with traders bracing for the possibility of more aggressive policy tightening by the Federal Reserve. The dollar gained.
The S&P 500 dropped 1.5% in a dramatic reversal of a more than 1% rally in early trading Thursday on the back of upbeat earnings. The tech-heavy Nasdaq 100 fell about 2%, underperforming than main benchmarks, as the jump in yields weighed on growth-related stocks.
Treasury yields rose across the curve, with the policy-sensitive two-year rate climbing as much as 15 basis points 2.73% as traders priced in 50 basis-point rate hikes at each of the next three meetings. The dollar gained against all of its major peers following the surge in yields.
Fed Chair Jerome Powell said he saw merit in the argument for front-loading interest-rate increases and that a half-point hike “will be on the table for the May meeting.” He declined to comment on market pricing but noted minutes of the March meeting showed that many officials backed one or more half-point hikes.
On the earnings front, Tesla Inc. gained after posting record profits that blew past estimates and with Elon Musk predicting output will grow at a fast clip for the rest of the year. The stock rose 3.2% on the day, after rising as much as 12% in early trading.
Airlines rallied as American Airlines Group Inc. said corporate and international flying was coming back and projected a second-quarter profit. United Airlines Holdings Inc. jumped 9.3% after forecasting a profit this year.
While inflation and central-bank reactions to the spike in rising prices are big drivers of markets right now, earnings have been important this week too, especially after Netflix Inc.’s selloff, Chris Gaffney, president of world markets at TIAA Bank, noted.
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