Fed March Cut Hopes Shattered – US Market Wrap

– Stocks saw their biggest decline this year after Jerome Powell said the Federal Reserve wants to keep its options open instead of rushing to cut interest rates.
– In remarks made following the Federal Reserve’s decision in January, Powell expressed doubts about the likelihood of a rate reduction in March. The central bank also stated that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%,” suggesting that policymakers are not eager to lower interest rates.
– The S&P 500 fell the most since September. Losses were led by big tech – the group that has powered the bull-market run. Microsoft and Alphabet slumped after disappointing investors betting that an artificial-intelligence bonanza would quickly fuel results. After the close, Qualcomm Inc. gave a revenue forecast that was in line with estimates. Treasuries remained bid as fresh concerns about regional lenders added to economic worries after New York Community Bancorp’s surprise loss.
– In a fresh indication of lessening inflation pressures that allow Federal Reserve officials to lower interest rates this year, data released on Wednesday showed a broad gauge of US labour costs cooled by more than forecast. Separately, the ADP Research Institute reported that wage growth slowed and companies added fewer jobs in January than anticipated, totaling 107,000.
– Investors have been especially sensitive to news on the overall supply of federal debt for the past few months, at a time when the Fed has been gradually reducing its own holdings of US securities. In the meantime, the US Treasury increased the size of its quarterly issuance of longer-term debt for the third consecutive time, and suggested that no more increases are likely until next year. Relief from further boosts to auction sizes for longer-term securities may help support demand for Treasuries.