Stocks fall as Fed delivers hawkish rate hike

Stocks Fall Worldwide as Federal Reserve Delivers Hawkish Rate Hike, Signals More to Come

Global Market Reactions to Federal Reserve Rate Hike

By Chibuike Oguh

Federal Reserve Raises Interest Rates

NEW YORK, Sept 16 (Reuters) - Global stocks fell on Wednesday, reversing gains from early trade, while U.S. government bond yields rose after the U.S. Federal Reserve delivered a hike in interest rates and suggested more were coming.

The Fed raised interest rates by 25 basis points, its first increase since 2023, and signalled further hikes in the months ahead. New Chair Kevin Warsh joined a unanimous vote in favor of the move.

Inflation and Policy Outlook

The U.S. central bank's decision is aimed at addressing inflation driven partly by higher oil prices. Fed officials expect one more interest rate increase this year and expect to hold steady in 2027.

Stock Market Performance

On Wall Street, benchmark S&P 500 and the Nasdaq gave up gains in early trade and finished lower with energy and financials the main drag.

The Dow Jones Industrial Average fell 1.21%, the S&P 500 fell 0.45% and the Nasdaq Composite lost 0.01%.

Expert Commentary

"Our view is that they have done this rate hike and maybe in the future, the market may be overpricing too many hikes going forward, and it may not be as many, and that would be a good relief for risk assets as well as commodities," said Wasif Latif, chief investment officer at Sarmaya Partners.

Global and European Markets

Concerns over rising inflation and higher government bond yields had weighed on equities in the previous two sessions.

MSCI's global equities index fell 0.16%, on track for the third straight session of losses.

European shares had closed before the Fed's decision. The pan-European STOXX 600 rose 0.46%. Britain's FTSE 100 index added 0.28% while benchmarks in Germany, France and Spain also saw gains.

Bond Yields and Currency Movements

U.S. Treasury Yields

U.S. yields rose, with the 2-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 7.5 basis points to 4.738%.

The yield on benchmark U.S. 10-year notes rose 2.45 basis points to 5%.

Commodities and Currency Markets

Oil Prices

Middle East Supply Concerns

OIL DIPS

Oil prices fell as reports that Saudi Arabia was offering additional crude cargoes via Oman after drone attacks damaged the kingdom's oil pipeline to the Red Sea. The move appeared to ease concerns about the scale of Middle East supply disruptions.

Vessel passage through the Strait of Hormuz remained constrained as attacks in the region intensified. 

Brent crude futures lost 2.69% to settle at $105.83 a barrel.

Currency Market Reactions

In currencies, the dollar gained against major peers including the euro and the yen following the Fed's decision.

The euro was down 0.68% at $1.1464.

The Japanese yen weakened 0.77% against the greenback to 156.31 per dollar. 

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.63% to 100.31.

Gold Prices

Spot gold fell 0.69% to $4,263.19 an ounce.  

(Reporting by Chibuike Oguh in New York; Editing by Nick Zieminski and Chizu Nomiyama)