US Stocks Lower on Fed Official Remarks06/18 09:24
Stocks were broadly lower Friday after a Federal Reserve official said that
the nation's central bank might need to raise interest rates as early as next
year, sooner than the Fed's latest estimate of possible rate increases in 2023.
(AP) -- Stocks were broadly lower Friday after a Federal Reserve official
said that the nation's central bank might need to raise interest rates as early
as next year, sooner than the Fed's latest estimate of possible rate increases
The S&P 500 index fell 0.9% as of 9:50 a.m. Eastern. The Dow Jones
Industrial Average lost 1.3%, dragged down by technology companies and banks,
while the Nasdaq Composite was down 0.6%.
The S&P 500 is on pace to end the week down 1.6% while the Dow is down more
than 3%. The Nasdaq is still barely positive for the week.
St. Louis Federal Reserve President James Bullard said on business news
channel CNBC that he expects the first interest rate increase the Fed could
make could come as soon as 2022. That's faster than what the Federal Reserve
said on Wednesday, when a forecast by policymakers put the consensus estimate
of interest rate hikes in 2023.
The quickly recovering economy after the pandemic has caused a degree of
inflation, with prices for basic materials like lumber, copper and oil rising
as well as other goods like airline tickets and used cars. The general
consensus is that the inflation will be temporary and is a result of an economy
recovering from near depression levels, but part of the Fed's mission is to
keep prices under control.
The first action the Fed is likely to take would be a slowdown in its $120
billion of monthly bond purchases, which are helping to keep mortgages cheap,
but the Fed's chair said such a tapering is still likely "a ways away."
Higher interest rates would cause high-priced stocks like technology
companies to be less attractive to investors, and would likely push a greater
number of investors into securities like bonds for better returns, which would
come at the expense of the stock market.
Bond yields were slightly higher after Bullard's comments. The yield on the
2-year Treasury note rose to 0.25% from 0.23% a day earlier.