Energy stocks, Facebook help Wall Street higher ahead of Fed decision

22 March, 2018, 02:09 | Author: Luis Fowler
  • Dow drops more than 300 points

USA stock index futures were lower on Wednesday as traders moved cautiously ahead of an expected Federal Reserve interest rate hike and continuing fallout from Facebook Inc's data privacy breach.

The Federal Reserve is expected to raise US rates for the first time this year after a two-day policy meeting, but investors are on edge over the kind of monetary policy regime new Federal Reserve Chair Jerome Powell will pursue.

While markets are sure about the quarter-point hike, they are less confident of what the Fed signals next: three hikes this year as previously forecast by policy makers or four.

Facebook shares tumbled 7.1 percent on reports that a political consultancy that worked on President Donald Trump's campaign gained inappropriate access to data on more than 50 million users, sparking broader concerns about data privacy and security. The S&P 500 lost 2.56 points, or 0.09 percent, to 2,714.38. Names sensitive to higher rates such as utilities.SPLRCU, down 0.39 percent, and real estate.SPLRCR, off 0.93 percent, were under pressure.

The Dow Jones Industrial Average declined 454 points, or 1.82%, to 24,493, the S&P 500 lost 54 points, or 1.95%, to 2,698 and the Nasdaq Composite fell 187 points, or 2.5%, to 7,295.

"So far, we have seen low-level (trade) skirmishes, which are not material enough to affect the world economy".

"The economic situation post-tax cuts also justifies a significant shift upwards in the dot plot", he added, referring to fears the Fed's de facto policy forecast chart will signal four rate rises rather than three because of the effects of USA tax reforms.

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The yield on 10-year USA government bonds reached 2.885% and short-term 2-year yield rose to 2.341%.

"But if we see retaliation, and significant trade disruptions, it's a different order or magnitude, could begin to affect global growth forecasts". He imposed tariffs on imported steel and aluminium earlier this month. The yield was just one basis point higher on the day at 0.59%.

Fears of a trade war have also weighed on commodity prices, though tensions in the Middle East supported oil, lifting Brent futures nearly half a percent.

Netflix and Amazon, however, rose with 1.28% and 2.69%, respectively.

Shares of Twitter plunged, down 10.3 percent as of 2.22pm in NY, amid concern about increased scrutiny of social media companies and a Bloomberg report that Israel's government is considering taking "legal action" against Twitter for ignoring repeated requests to remove online content that was inciting or supportive of terrorism.

As a result shares in soybean exporter Archer-Daniels (ADM.N) fell 1 percent and Bunge (BG.N) dropped 0.7 percent.

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