Rate Hike Worries Resurfaced After Fed Minutes, Nasdaq Dropped 1%

Boris Petrov
16 Aug, 2023
New York City

Market averages on Wall Street traded down after rate path worries resurfaced.

The S&P 500 and the Nasdaq Index declined around 1% after investors reviewed the Fed's minutes of meeting conducted in July. 

Policymakers decided to increase the rate hike by 25 basis points at the end of two-day meeting in mid-July but many market participants forecast the Fed to pause for a while. 

But the minutes of the latest meeting showed that most participants worried that inflation is too high and rates may have to be lifted to curb economic activities.  

“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” Fed's minutes of meeting noted after the rate decision. 

After the rate increase, Fed funds rate range was increased 25 basis points to between 5.25% and 5.0%. 

Despite the multiple rate hikes, inflation has still hovered well above the Fed's 2% target rate and several policy committee members noted. 

“In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the latest minutes of the meeting noted.

Several policy members expressed the view that the economic outlook remains highly uncertain and the full impact of the cumulative rate hike is not fully felt by the economy. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.8% to 4,404.33 and the Nasdaq Composite fell 1.1% to 13,474.63. 

The yield on 2-year Treasury notes increased to 4.98%, 10-year Treasury notes inched higher to 4.26% and 30-year Treasury bonds edged down to 4.38%. 

Crude oil increased $1.86 to $79.11 a barrel and natural gas prices decreased 6 cents to $2.66 a thermal unit. 

 

U.S. Stock Movers 

Target Corp increased 3% to $128.75 despite the company reporting revenue that fell short of market expectations and the company lowering earnings for the full-year. 

TJX Companies Inc jumped 4.1% to $89.31 after the discount retailer reported second quarter adjusted earnings of 85 cents and revenue of $12.76 billion. 

VinFast Auto declined 19% to $30.11, a day after the stock soared more than 250% after the company completed its listing on the Nasdaq through a merger with the SPAC Black Spade. 

Intel Corp declined 3.5% to $33.53 after the company decided to terminate its merger agreement to acquire Tower Semiconductor. 

As a part of the merger agreement, Intel will pay $353 million to Tower Semiconductor. 

Tower Semiconductor declined 10.7% to $30.17.