US stocks fell on Wednesday after investors pored over the minutes of the Federal Reserve’s last meeting. which indicated that most central bankers backed its recent quarter-point increase but some favored a bigger rise.
In New York, the blue-chip S&P 500 index lost 0.2 percent and the tech-heavy Nasdaq Composite gained 0.1 percent, paring earlier gains from before the release of the minutes.
The summary of the Fed’s latest policy meeting, which ended on February 1, revealed that almost all officials backed its decision to raise its benchmark interest rate by a quarter of a percentage point, but a few preferred a half-point increase.
St Louis Fed president James Bullard has said in recent weeks that he favored a larger increase as the central bank takes aim at inflation. “The participants favoring a 50-basis point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance,” the minutes said.
In the weeks since the meeting, fresh data has indicated that the US economy may be running even hotter than central bankers believed three weeks ago. “The Fed minutes are a little out of date because there was blowout jobs report and a robust consumer spending report after the Fed meeting, showing inflationary pressures are likely stronger than previously feared,” said Chris Zaccarelli, a chief investment officer of Independent Advisor Alliance.
The moves came a day after US stocks recorded their worst trading session in two months, as traders were unnerved by evidence of a resilient economy and the prospect of further interest rate rises. Yields on long- and short-dated Treasuries were lower after a slight rebound following the minutes. Benchmark 10-year US Treasuries fell to 3.92 percent.
Yields on interest rate-sensitive two-year notes fell to 4.70 percent after touching a three-month high on Tuesday. “If you compare sentiment to one month ago, people were expecting the Fed might only have a little room left to hike,” said Dickie Wong, head of research at Kingston Securities. “But now it looks like inflation may not ease up and the Fed will have to raise rates repeatedly.” Earlier on Wednesday, European and Asian stocks weakened, dragged down by Tuesday’s falls in the US and signs of economic optimism in the eurozone.
In Asian markets, Japan’s benchmark Topix index fell 1.1 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks slipped 0.9 per cent and Australia’s S&P/ASX 200 fell 0.3 per cent. In currency markets, the dollar index, which measures the greenback against six peer currencies, rose 0.4 percent. The euro fell 0.4 percent against the dollar. The price of Brent crude oil fell 3 percent to $80.60 a barrel, while WTI, the US equivalent, dropped 3.2 percent to $73.95 a barrel.