Update at 4:20 pm EST
Tech stocks lead Wall Street lower Wednesday, as the Federal Reserve said it would be prepared to reduce its $9 trillion balance sheet more quickly than forecast, minutes from the central bank's March meeting revealed.
The Dow Jones Industrial Average finished down 144 points, or 0.42%, 34,496, while the S&P 500, which is down 5.1% for the year, lost 0.97%. The tech-focused Nasdaq dropped 2.22%.
Stocks extended declines, in fact, following release of the minutes, which indicated that the Fed will begin reducing its balance sheet by around $95 billion a month, nearly twice as fast as in 2017, while moving to 'expeditiously' lift interest rates.
"Participants judged that it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously," the minutes said. "They also noted that, depending on economic and financial developments, a move to a tighter policy stance could be warranted."
Federal Reserve Governor Lael Brainard told an event in Minneapolis late Tuesday that the Fed would not only be "methodical" in its effort to raise interest rates in order to tame the highest levels of inflation in forty years, but it would also begin the run-off of the Fed's $9 trillion balance sheet as soon as next month, and at a "considerably" more rapid pace than in the past.
Those comments lifted Treasury bond yields to the highest levels in two years, taking 10-year notes to 2.596% in overnight trading, while boosting the U.S. dollar index to 99.59 in overnight trading.
The CME Group's FedWatch tool suggests a 77.7% chance of a 50 basis point hike in May, followed by a 60% chance in June and a 48.5% chance in July.
That puts the Fed's $9 trillion balance sheet -- acquired by years bond purchases under its quantitative easing and pandemic support programs -- in focus. Selling those assets into the bond market will raise 'market' interest rates alongside the official Fed Funds rate, creating a 'double-tightening' affect that will both tackle inflationary pressures more aggressively but also put the economy in a more vulnerable position in terms of a slowdown and resultant recession.
The surge in bond yields held down gains for global stocks, which were also hit by data from China showing a sharp slowdown in economic activity last month as the country's Covid infection rate surged and closed factories and businesses around the country.
China's Caixin PMI reading, a composite look at activity in the world's second-largest economy, plunged to 43.9 points last month, the lowest in more than two years and well below the 50 point mark that separates growth from contraction.
In Europe, with investors focused on both the human tragedy from Russia's war on Ukraine and the impact of sanctions on exports from Moscow, oil prices extended gains ahead of a White House statement later today and comments from European Commission President Ursula von der Leyen that suggested crude could be the next target.
Oil prices tumbled, however, after the the International Energy Agency said member states would release 120 million barrels of crude from their strategic reserves, following on from last week's SPR tapping from President Joe Biden.
WTI crude futures for May delivery were marked $4.75 lower from Tuesday's close at $97.21 per barrel in overnight trading, while Brent contracts for June, the new global pricing benchmark, slumped $4.65 to trade at $102 per barrel.
Twitter (TWTR) shares finished slightly off after Elon Musk conceded late Tuesday what pretty much everyone in the financial world, and certainly those invested in the micro-blogging website already knew: he has no plans to sit on his $3.7 billion stake.
Spirit Airlines (SAVE) slumped lower 2.4% after the low-cost carrier received an unsolicited $3.6 billion takeover bid from JetBlue Airways (JBLU) that could potentially upend its planned merger with Frontier Group (ULCC).
Executives of the biggest U.S. oil companies are expected to face a grilling from lawmakers in Washington Wednesday on record high gasoline prices as the impact of Russia's war on Ukraine continues to ripple into consumer spending in the world's biggest economy.
The U.S. House Energy and Commerce Subcommittee on Oversight and Investigations will ask bosses from Exxon Mobil (XOM), Chevron (CVX), Devon Energy (DVN) and others for the reasons as to while gasoline price rose so quickly during the early March run-up in crude prices, and whey they've taken so long to come down now that WTI crude is some 16% south of its March 8 peak.
Gas prices hit an all-time high of $4.31 in early March, and were last seen pegged at a national average price of $4.164 by the AAA, a figure that would represent only a 3.5% decline.
Chevron shares, which have gained more than 39.2% so far this year -- against a 5.1% decline for the S&P 500 -- rose nearly 1% to $164.95 each. Exxon shares rose 1.1% to $83.65 each.
