U.S. Stocks Diverge, Dollar Extends Rally on Fed’s Rate Outlook
Dow falls, Nasdaq rises and the S&P edges down to a third day of declines
By and Updated June 17, 2021 4:47 pm ET
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Investors’ risk appetite had faded midweek after Federal Reserve officials gave the clearest signals yet that they plan to gradually pull back the monetary policies that helped propel markets to record highs. Their median projection showed they see lifting their benchmark rate by the end of 2023, sooner than previously forecast.
“The key message is that we will not stay here forever,” said Florent Pochon, head of cross-asset strategies at Natixis. “The Fed really wanted to take the opportunity of the current window and the strong momentum to send the signal that it is ready to normalize, but it will be a difficult exercise if they want to avoid another taper tantrum.”
The S&P 500 ended Thursday down 1.84 points, or less than 0.1%, to 4221.86. The Dow Jones Industrial Average declined 210.22 points, or 0.6%, to 33823.45 for its fourth straight session of declines. The Nasdaq Composite rose 121.67 points, or 0.9%, to 14161.35, boosted by gains among technology stocks.
Shares of miners were among the biggest decliners in the broader market, hurt by a slide in gold prices. The price of the precious metal tends to decline when investors anticipate rates rising and yield-bearing investments becoming more attractive.
Mining company Barrick Gold dropped $1.42, or 6.3%, to $21.03 and Newmont lost $4.78, or 7%, to $63.67.
Financial stocks also lost ground as Treasury yields slipped.
Bank of America dropped $1.82, or 4.4%, to $39.80 and Morgan Stanley shed $3.19, or 3.5%, to $87.91.
Meanwhile, CureVac slumped $36.96, or 39%, to $57.83 after the German company said its experimental Covid-19 vaccine fared poorly in a large clinical trial, dimming the shot’s prospects for wider use.
In currency markets, anticipation of higher rates helped push the WSJ Dollar Index, which tracks the greenback against a basket of others, up 0.5%. That added to the index’s 0.8% gain Wednesday, which was its biggest climb in more than a year.
A strong U.S. economy means that inflation will be quicker as there is a clear demand for labor, said Kerry Craig, global market strategist at J.P. Morgan Asset Management. “The markets are coming round to reality on that,” he said.
Powell Says Factors Driving Inflation Should Be Temporary
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Powell Says Factors Driving Inflation Should Be Temporary
Powell Says Factors Driving Inflation Should Be Temporary
Federal Reserve Chairman Jerome Powell described the outlook for inflation in the U.S. economy and said there are signs that prices that have moved up quickly should cease rising and retreat. Credit: Al Drago/Press Pool
Mr. Craig expects the Fed to start talking about plans to taper its current bond-buying program in September, and start scaling back early next year, followed by one increase in interest rates by the end of 2023.
Other strategists said the Fed’s statement showed it is closely monitoring how other central banks are responding to improving growth and rising inflation around the world.
“There have been some concerns building that the Fed was going to fall behind the curve, and I think [their statement] suggests that they won’t,” said Seema Shah, chief strategist at Principal Global Advisors.
Overseas, the pan-continental Stoxx Europe 600 slipped 0.1%, snapping a nine-day winning streak, after closing Wednesday at a record.
South Korean and Japanese stock indexes fell Thursday.
Photo: Lee Jin-man/Associated Press
Japan’s Nikkei 225 closed down 0.9%, logging its biggest one-day decline yet for the month, and South Korea’s Kospi Composite index edged 0.4% lower. The Shanghai Composite ticked up 0.2% and Hong Kong’s Hang Seng rose 0.4%.
—Chong Koh Ping contributed to this article
Write to Will Horner at
William.Horner@wsj.com and Akane Otani at akane.otani@