US equities take a beating as rate hike expectations rise after Powell | Forexlive

US equities slumped hard after Fed Chairman Jerome Powell indicated that interest rates could go higher than the December dots indicated and could get there in 50 bps increments if the data stays hot.

The market reaction was swift but there was an attempt to bounce in the US morning. The market erased most of the gains about 40 minutes after the comments and there was a second bounce when Powell finished. Ultimately though, they were of the dead cap variety.

Why did tech outperform? The thinking here might be that higher short-term rates will kill inflation once and for all, leading to lower rates down the line. You can see that in the long end of the Treasury curve where yields fell 1-3 bps at the 10-30y tenor.

• S&P 500 down 63 points, or 1.5% to 3986
• Nasdaq -1.25%
• Russell 2000 -1.5%
• DJIA -1.7%
• TSX Comp -1.1%