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Reverses to Decline After Starting Higher…Warsh: "Inflation is too high and has lasted too long"
US 10-year Treasury Yield Back Above 5%…Dollar Value Surges
On the 16th (local time), the New York stock market in the United States uniformly fell due to the Federal Reserve's (Fed) benchmark interest rate hike and hawkish remarks by Fed Chairman Kevin Warsh.
On this day, the Dow Jones Industrial Average 30 closed at 51,461.90, down 631.21 points (1.21%) from the previous trading day.
The Standard & Poor's (S&P) 500 index closed at 7,551.81, down 33.92 points (0.45%) from the previous close, and the tech-heavy Nasdaq Composite index closed at 25,978.43, down 3.15 points (0.01%) from the previous close.
The New York stock market started higher on this day but reversed to a decline when hawkish remarks on inflation came out during Chairman Warsh's press conference at 2 PM.
The Fed raised the benchmark interest rate by 0.25 percentage points to 3.75-4.00% at the Federal Open Market Committee (FOMC) meeting today. This is the first tightening measure in 3 years and 2 months since July 2023.
All 12 FOMC members with voting rights unanimously approved the rate hike. The possibility of further increases within the year was also suggested.
Chairman Warsh emphasized the Fed's commitment to price stability at the press conference, stating, "Inflation is too high and has lasted too long."
The US Treasury market, which had paused ahead of the Fed's rate decision, showed renewed instability.
The US 10-year Treasury yield once again surpassed the 5% mark. As of 4:30 PM, it stood at 5.023%, up 2.7 basis points (1bp=0.01 percentage point) from the previous close.
The dollar's value rose.
The Dollar Index (DXY), which reflects the dollar's value against six major currencies, rose 0.6% to 100.21, its highest level since July 31.
By sector, major bank stocks such as Goldman Sachs and Wells Fargo fell by more than 3% amid observations that the interest rate hike would not be a one-time event. This was influenced by forecasts of slowing loan growth.
Intel's stock price rose by more than 4%, helping to narrow the Nasdaq's decline. This was influenced by a Reuters report that SK Hynix is negotiating with Intel to produce memory chips in the United States for the first time.
Jeff Schultz, Chief Investment Strategist at Franklin Templeton Institute, stated, "Chairman Warsh's hawkish tone at the press conference led to the market decline."
He added, "This directly reflects the hawkish tone seen in the Jackson Hole speech," and "This rate hike shows that the Fed is acting on its promise to bring inflation back to its target."
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