US Stocks Slide on Persistent Inflation Concerns and Hawkish Fed Tone

　　

US stocks declined lower on Wednesday, witnessing some selling pressure, and dropped for a second straight session after economic data highlighted persistent inflationary pressures and Federal Reserve officials continued to sound hawkish. Data released in the US showed ISM Manufacturing PMI increases to 47.7 in February, which came in below the market expectation of 48.

The PMI report indicated that the economic activity in the US manufacturing sector continued to contract in February, providing some support to the US Dollar. Meanwhile, stock markets witnessed downside pressure as investors are still struggling to ignore fears of more rates from the Federal Reserve. Moreover, hawkish commentaries delivered by Fed policymakers also fueled US Treasury yields as Minneapolis Fed President Neel Kashkari reiterated on Wednesday that inflation in the US is still very high and that their job is to bring it down. The jump in the US Treasury bond yields suggests the market’s fears of inflation and recession, which in turn undermined the stock markets.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Wednesday as the S&P 500 closed the day at its lowest level in nearly six weeks as market sentiment remained fragile after Fed officials stay hawkish. The S&P 500 was down 0.5% daily and the Dow Jones Industrial Average meanwhile was little changed for the day. Eight out of eleven sectors in the S&P 500 stayed in negative territory as the utility sector and the Real Estate sector is the worst performing among all groups, losing 1.72% and 1.49%, respectively. The Nasdaq 100 meanwhile dropped the most with a 0.9% loss on Wednesday and the MSCI World index was down 0.3% for the day.

Main Pairs Movement

DXY was lower across the board after the release of China’s manufacturing PMI last month, the highest in over a decade. Price fell 0.45% to 104.40 in late trading  New York session on Wednesday. The ISM Manufacturing Index edged up to 47.7 last month, the first increase in six months, but remains in contractionary territory. At the time of writing, the price traded at 104.385.

WTI bulls are in the market amid signs of stronger demand in Asia and Europe. Fundamentally, US commercial crude oil inventories gained less than expected last week, rising only 1,166kbbl. However, US exports of crude hit a record high of 5,629kbbl last week (+22.4% w/w). At the time of writing, the price traded at 77.764.

The Dow Jones Industrial Average rose 5.14 points, or 0.02%, to 32,661.84, the S&P 500 lost 18.76 points, or 0.47%, to 3,951.39 and the Nasdaq Composite dropped 76.06 points, or 0.66%, to 11,379.48.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
EUR	CPI (YoY) (Feb)	18:00	8.20%
EUR	ECB Publishes Account of Monetary Policy Meeting	20:30
USD	Initial Jobless Claims	21:30	195K