Concerns Over Fed Hike Sparks Wall Street Sell-off
The Dow Jones’ gains for 2015 were erased today by huge falls on Wall Street on Tuesday, sparked by worries that the strength of the dollar and the weak price of oil is a toxic mix for the stock market.
By Peter Martin
Tuesday, March 10, 2015
By mid-afternoon in New York, the Dow Jones was off by a whopping 293 points or 1.63% to stand at 17,702, while the broader-based S&P 500 index suffered almost as big a decline, falling 1.48% to 2048.5.
The dollar, meanwhile, gained noticeably against all its major peers, particularly the euro, driven by the differing outlooks for central bank action. USD/CHF surged 1.32% to 0.9987, EUR/USD dropped 1.42% to 1.0698, while GBP/USD fell 0.39% to 1.5069. We saw similar market action on Friday, with the dollar rising and the equity markets selling off, which was sparked by speculation that the strength of the US labor market will press the Fed into hiking rates this summer.
Today’s developments would seem to stem from these same concerns, following a report from the Labor Department today that showed job openings reaching a 14-year high at the end of January. The Job Openings and Labor Turnover Survey, which Fed Chief Janet Yellen has cited in the past as a report she uses as a source of additional information on the labor market, reported job openings of 4.998 million on the last business day of January, up from 4.877 million in December. While this is no great change, it does push job openings to the most they have been since January 2001, and along with Friday’s bumper payrolls data, paints a picture of a burgeoning jobs market.
Worries about a Fed rate hike were also exacerbated by a speech given late Monday by Dallas Fed President Richard Fisher. Mr Fisher claimed inflation will pick up once energy prices steady and called for the Fed to move forward with normalizing monetary policy. ‘The idea that we can substitute a steeper future funds-rate path for an early lift off seems risky to me,’ he said. ‘I would rather the FOMC raise rates early and gradually than late and steeply.’ These comments do not diverge substantially from the stance Mr Fisher has taken previously, though they do echo comments made by other more centrist Fed officials, such as James Bullard, the head of the St Louis Fed.
Oil fell after the US Energy Department raised its projections for 2015 domestic oil output and data showed Chinese producer prices fell again in February. US crude oil futures dropped below $49 a barrel.
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