Markets stabilize as investors digest latest Fed minutes

NEW YORK, United States – Stock markets stabilized on Wednesday after Wall Street’s defeat in the previous session, as markets assessed the Federal Reserve’s latest meeting minutes amid concerns about higher interest rates.

Minutes from the February 1 Fed meeting showed that almost all policymakers were in favor of a smaller rate hike.

But since then, January’s inflation and employment data suggest that price pressures remain acute, fueling fears that the US Federal Reserve’s rate-hiking cycle could be extended.

Still, US markets avoided another day of dramatic losses, with the Dow and S&P 500 ending on modest losses and the Nasdaq finishing slightly higher after a choppy day.

This was followed by a mixed session on European trading floors and losses on leading Asian stock exchanges.

Stocks fell on Tuesday and in Asian trading on Wednesday, as strong economic data fueled expectations that US borrowing costs will continue to rise and remain elevated for some time.

“The higher (US) interest rates stay, the less relative attractiveness equities have – especially as we’re about to face some serious earnings headwinds,” Neil Wilson, an analyst at trading firm Finalto, told AFP.

Briefing.com analyst Patrick O’Hare noted that the Fed meeting came ahead of the latest inflation and jobs data, which showed inflation is slow to fall and the job market is resilient.

“Accordingly, the market should be more sensitive to views in the minutes that emphasize the need to raise rates and keep them at higher levels longer than to views with a softer-sounding approach,” O’Hare said.

The latest data has essentially wiped out any talk of a pause in rate hikes and even a Fed rate cut by the end of the year.

“A tight labor market and resilient consumer demand could prompt the Federal Reserve to continue its rate-hiking campaign into the summer,” said Jeffrey Roach, LPL Financial’s chief economist.

“Investors should expect volatility until markets and central banks agree on the expected rate path.”

Elsewhere, oil prices fell on renewed recessionary risks.

“Crude oil prices are expected to fall for the second straight day amid concerns that sharply higher prices could lead to a slowdown in demand,” said Michael Hewson of CMC Markets.