Stocks end modestly lower after Fed hikes rates; energy up

Randal Sanchez
March 22, 2018

USA stock index futures were lower on Wednesday as traders moved cautiously ahead of an expected Federal Reserve interest rate hike and continuing fallout from Facebook Inc's data privacy breach.

Market participants are also watching for signs from the U.S. central bank, which is expected to take a more aggressive path toward normalising monetary policy, as the Federal Reserve's two-day monetary policy meet concludes today.

The market believes the Fed is set to raise interest rates on Wednesday as Thomson Reuters data shows traders expect a quarter-point hike to be a certainty.

Facebook shares tumbled 7.1 percent on reports that a political consultancy that worked on President Donald Trump's campaign gained inappropriate access to data on more than 50 million users, sparking broader concerns about data privacy and security.

US stocks, which were roiled by a hefty selloff in technology shares this week, were down in early trading.

Two-year note yields, which are highly sensitive to interest rate policy, jumped as high as 2.366 percent, the highest since September 2008, before falling back to 2.308 percent.

The Dow Jones Industrial Average .DJI fell 44.96 points, or 0.18 percent, to end at 24,682.31, the S&P 500 .SPX lost 5.01 points, or 0.18 percent, to 2,711.93 and the Nasdaq Composite .IXIC dropped 19.02 points, or 0.26 percent, to 7,345.29.

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A pan-European equity index fell nearly 0.3 percent, its early weakness accelerating after the WSJ report on China and a tech shares index reversing an early bounce.

There was "no change to 2018 and I think that’s why you have such a muted reaction", said Aaron Kohli, an interest rate strategist at BMO Capital Markets in NY.

Stocks have struggled this year while bond yield have moved higher. "But if we see retaliation, and significant trade disruptions, it's a different order of magnitude (which) could begin to affect global growth forecasts", said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

A selloff this week wiped some $50 billion off the value of shares of social media giant Facebook (NasdaqGS: FB - news).

Concerns over the imposition of USA trade tariffs on metals and against China continue to weigh on financial markets.

Fears of a trade war have also weighed on commodity prices, though tensions in the Middle East supported oil prices on Wednesday.

An increase would mark its sixth hike since late 2015 when the US central bank started gradually tightening monetary policy following a period of near-zero interest rates in the aftermath of financial crisis in 2008. Its shares were down 1.5 percent in premarket trading, on track for its third day of losses amid uproar over the alleged misuse of users' data.

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