US stocks close sharply lower after tougher Fed minutes and retreat in techs

Stocks in the United States ended in a sharp decline on Wednesday (5), after the minutes of the US central bank’s meeting in December signaled the risk of an increase in interest rates sooner than expected.

The S&P 500 and Nasdaq indices quickly extended their declines after the release of the minutes, which investors considered more “hawkish” (hard on inflation) than feared.

The Dow Jones Index, which had hit a record high earlier in the day, reversed course and also closed lower.

The minutes of the Fed’s December 14-15 monetary policy meeting provided more details on the central bank’s move last month towards tighter monetary policy to curb inflation. Monetary policy makers said in December that the US labor market was “very tight”.

“This is more ‘hawkish’ than expected. This shift toward fighting inflation harder can be problematic for both equity and bond markets,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

The technology sector weighed the most on the S&P 500, while real estate, more sensitive to the outlook for interest rates, led the sector declines.

The S&P 500 index closed down 1.94% to 4,700.58 points. The Dow Jones fell 1.07% to 36,407.11 points. The Nasdaq Composite technology index retreated 3.34% to 15,100.17 points.

The S&P 500 suffered its biggest daily drop since November 26th. The Nasdaq had its worst day since February 25, 2021. The Dow Jones had its worst session since December 20th.

Tech giants Apple, Alphabet, Amazon, Meta and Microsoft fell between 0.4% and 1.2%, the biggest pressure on the S&P 500 and Nasdaq.

Growth stocks, which are interest-sensitive, have also come under pressure from a recent spike in US Treasury yields, triggered by growing anxiety over the prospect of Fed rate hikes to curb inflation.

“With interest rates expected to rise this year, tech stocks are likely to feel a little more pressure,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

At 1:26 pm, Brasília time, the index S&P 500 lost 0.21%, at 4,783.37 points, while the Dow Jones rose 0.21%, to 36,878.14 points. The Nasdaq Composite technology index retreated 0.87% to 15,486.16 points.

The ADP vacancy report showed the creation of 807,000 jobs in the private sector of the U.S last month, more than twice the number predicted by economists consulted by Reuters.

The data comes ahead of the US Department of Labor’s employment reading for December, which is broader and more closely monitored, and which will be released on Friday (7).