NEW YORK CITY, RAW – Wall Street’s main indexes fell after US Federal Reserve Governor Lael Brainard said she expects rapid reductions to the central bank’s balance sheet, spooking investors already on edge about the prospect of fresh sanctions on Russia.
The tech-heavy Nasdaq fell the most as expectations of quicker interest rate hikes dulled the appeal for high-growth stocks. Amazon, Apple and Nvidia fell between one and 3.7 per cent.
“What is spooking the market is the phrase ‘at a rapid pace’ because that implies that they will not only allow bonds to mature, but they will also be selling bonds in order to get to a more neutral policy by the end of the year,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“That’s what’s causing the investors to be concerned – the speed and aggressiveness of the Fed with its balance sheet reductions.”
Investors now see nearly 81 per cent odds of a 50 basis points rate hike at the Fed’s meeting in May.
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Brainard said she sees methodical rate hikes and the Fed will quickly ramp up reductions to its nearly $US9 trillion ($A12 trillion) balance sheet to a “considerably” more rapid pace of runoff than the last time.
Wall Street opened lower as the West prepared new sanctions on Moscow after dead civilians were found lining the streets of a Ukrainian town seized from Russian invaders.
In early trading on Tuesday, the Dow Jones Industrial Average was down 61.63 points, or 0.18 per cent, at 34,860.25, the S&P 500 was down 24.44 points, or 0.53 per cent, at 4,558.20, and the Nasdaq Composite was down 197.02 points, or 1.36 per cent, at 14,335.53.
Meanwhile, data from the Institute for Supply Management showed US services industry activity picked up in March, boosted by the rolling back of pandemic restrictions, but businesses continued to face higher costs as supply strains persisted.
Micro-blogging site Twitter Inc gained 3.8 per cent, adding to its 27 per cent surge in the previous session, after saying it will name top shareholder and Tesla Inc CEO Elon Musk to its board.
Carnival Corp rose 5.3 per cent after the cruise operator reported its highest booking week in its history, boosting peers Norwegian Cruise Line Holdings Ltd and Royal Caribbean Cruises Ltd 2.5 per cent and 1.3 per cent, respectively.
Declining issues outnumbered advancers for a 2.71-to-1 ratio on the NYSE and a 2.35-to-1 ratio on the Nasdaq.
The S&P index recorded 36 new 52-week highs and five new lows, while the Nasdaq recorded 37 new highs and 38 new lows.