- Stocks in the United States fell after swinging between gains and losses as investors reassessed valuations in the aftermath of the Federal Reserve's latest signal that it will act aggressively if prices remain high.
- The S&P 500 edged lower in late trading, attempting to recover from a 1.9% drop triggered by Fed meeting minutes that suggested the central bank is ready to raise rates sooner and higher than previously anticipated. The hawkish stance hammered the riskiest assets, from high-priced software stocks to newly-public companies with limited track records of earnings.
- Treasuries continued to fall, though the rate of decline has slowed, with the 10-year yield hovering around 1.73%. The dollar was slightly stronger.
- The Federal Reserve's overtly hawkish stance has roiled financial markets to begin the year, with investors recalibrating how to price assets in an environment of expected high economic growth and rising interest rates. The removal of crisis-era accommodation represents a shift not seen in at least three years, during which time there was also a spike in volatility and, eventually, a major stock rout. While rising interest rates make capital more expensive and can reduce earnings power, they also enter an economy that is rapidly expanding.
- Comments by regional Fed presidents provided some additional insight as traders attempted to forecast a possible tightening schedule. In a speech, St. Louis Fed President James Bullard, a more hawkish policymaker, stated that the central bank's target interest rate could be raised as soon as March. Meanwhile, at a virtual event, San Francisco Fed President Mary Daly stated that the Fed's balance sheet would be reduced after the Fed Funds Rate was normalised.
- The release of jobless claims data in the United States ahead of Friday's payrolls report did little to change the market's mood. The number of claims increased to 207,000 last week, according to the release, but remained within the range predicted by 30 economists.
