US: Nasdaq loses 3.3% after Federal Reserve signals faster rate hikes

[NEW YORK] Wall Street sold off sharply on Wednesday after the Federal Reserve released meeting minutes indicating officials were ready to hike rates sooner than expected next year as inflation spikes.

The tech-rich Nasdaq Composite Index was the biggest loser, dropping 3.3 percent to close at 15,100.17.

The benchmark Dow Jones Industrial Average lost 1.1 per cent to finish at 36,407.11, while the broad-based S&P 500 fell 1.9 per cent to 4,700.58.

Sentiment turned sharply sour after the Fed released the report on its December policy meeting that showed central bankers saying "it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated."

Markets have risen during the Covid-19 pandemic after the Fed cut the interest rate to zero, and the tech sector especially prospered from the easy money policies.

While the forecasts from Fed officials last month indicated they expect as many as three rate hikes in 2022, the minutes showed they were ready to act more aggressively to fight inflation, which could potentially tighten conditions for businesses.

Markets also are concerned about the wave of price increases that have hit the economy, and Kathy Bostjancic of Oxford Economics said the minutes showed the inflation spike was more severe than the Fed anticipated.

"In large part, that reflected ongoing supply chain bottlenecks and labor shortages that are likely to last longer and be more widespread than expected - which will be exacerbated by the surge in Omicron," she said.

Among individual stocks, Boeing finished 0.3 per cent lower after reaching an agreement to sell 50 of its 737 MAX planes to low-cost US carrier Allegiant Air, with an option for another 50.

General Motors fell 4.6 per cent after formally launching its all-electric Chevrolet Silverado pickup truck, an emission-free version of its top-selling vehicle.

AFP