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WASHINGTON: U.S. stocks and oil tumbled on Friday while bond yields continued to gain as investors prepared for a bevy of interest rate hikes in a global inflation fight.

All three major indices on Wall Street steepened their losses one day after Federal Reserve Chairman Jerome Powell indicated that the U.S. central bank was preparing a half-point interest rate hike at its upcoming May meeting, with more to come.

The Dow Jones Industrial Average was down 1.84% in afternoon trading, while the S&P 500 lost 1.90% and the Nasdaq Composite dropped 1.86%.

The MSCI world equity index, which tracks shares in 45 nations, fell 1.93%.

Powell drove headlines on Thursday when he said a 50 basis point rate hike is “on the table” at the Fed’s next meeting, adding that it “is appropriate to be moving a little more quickly” to combat inflation.

“In recent weeks, there has been growing chatter the Fed might look to ramp up the rate it will be tightening its policy, and the update from Jerome Powell made it very clear that will happen. Good communication skills in this situation are crucial, and Mr. Powell gave a very clear signal there will be a 0.5% hike next month,” said David Madden, market analyst at Equiti Capital.

Wall Street loses steam ahead of Fed chair’s speech

The prospect of aggressive hikes was a boon to the U.S. dollar, which surged to a more than two-year high on Friday.

The dollar index, which tracks the greenback versus a basket of six currencies, was last up 0.64% to 101.218, clearing levels not seen since March 2020.

The dollar’s surge took a toll on fellow safe-haven gold, with spot gold prices falling 0.86% to $1,934.68 an ounce.

Yields on U.S. Treasury bonds were also on the uptick as traders prepared for higher rates, with short-dated bonds hitting three-year highs in Friday trading.

Two-year note yields, which are highly sensitive to interest rate moves, rose to 2.789%, the highest since December 2018, before dipping lower to 2.7134% in the afternoon.

Benchmark 10-year yields were last at 2.9064%, after reaching 2.981% on Wednesday, also the highest since December 2018.

“We’re repeating the same message from central bankers, and every time each repetition ratchets short interest rates higher,” said Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee.

European stocks finished down 1.76%, with France’s CAC 40 down 1.99% ahead of Sunday’s presidential run-off vote. Britain’s FTSE fell 1.39%.

Oil looked set for a weekly decline Friday, as concerns of looming interest rate hikes, weaker global growth and COVID-19 lockdowns in China hurting demand outweighed a potential European Union ban on Russian oil that would tighten supply.

Brent crude was last down 1.82% at $106.36 a barrel, while U.S. West Texas Intermediate (WTI) crude declined 1.97% to $101.76.

The oil price has been increasingly volatile in recent months.

Since the creation of the Brent futures contract, there have been only 29 days when the spread between the intra-day high and low was $8 a barrel or more. Of those, 16 have occurred this year.

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SAMIR SARDANA Apr 23, 2022 08:10am
1.85% fall in DJIA, is not a turning point in the DOW Oil fell by 2% - and when that happens,all Oil stocks fall by 2-3% (Exxon/Shell/BP.....) 50BPs rate hike, is 2 days old news. Rate hike fears has no impact on metal prices which over the last 2 days are down 0.3 -1% and steel is down 0.3%.Some metal stocks have crashed like Alcoa - but that is due to post results selling and a 10 day plant shutdown last quarter. Netflix has doomed the tech stocks - which also fell by 2% PLUS (with Goog by 6%) Rate hike will hit bank costs, raise YTMs and lower bond prices = crash in bank stocks (which all fell by 2-3%) Fall in Oil,Tech and Banks on the same day by 2-3%, and a weekend, is enough to pull down the DOW ,by 3%,as profit making positions, are also liquidated Dow will BOUNCE on Monday,Recover by Thursday,and will move up AFTER THE RATE HIKE DOW IS THE SUN - all else rotates around it.dindooohindoo
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