Nasdaq 100 Dips To September Lows, US Yields Rise To July 2006 Peak As Fed Delivers Hawkish Hold

The tech-heavy Nasdaq 100 index plunged to late August lows after the Federal Reserve decided to keep rates steady at 5.25%-5.5% but indicated the possibility of a further rate hike by the close of 2023 and removing a series of anticipated rate cuts (50 basis points) for 2024.

Many analysts interpret this decision as a hawkish hold. Fed Chair jerome Powell reiterated an intention to proceed meeting by meeting, but also emphasized the need to keep rates high for a longer period until there is confidence in inflation returning to the 2% target.

Market Reactions To FOMC’s September Meeting

• The Invesco QQQ Trust QQQ, the largest ETF tracking the Nasdaq 100, dropped 1.5% at 4 p.m. New York time, reaching its lowest point since Aug. 28.
  
• The SPDR S&P 500 ETF Trust SPY and the iShares Russell 2000 ETF IWM both slipped by 0.9%, while the Dow Jones Industrial Average ETF DIA was only marginally down by 0.2%.
  
• Among sectors, the worst performers were the Communication Services Select Sector SPDR Fund XLC and the Technology Select Sector SPDR Fund XLK, both down by 1.5%.
  
• The yield on the policy-sensitive two-year Treasury increased by 6 basis points to 5.16%, reaching its highest point since July 2006.
  
• The dollar recovered, reversing its early session losses, with the DXY index rising by 0.1%. The euro (EUR/USD) declined to 1.0657, and the pound (GBP/USD) reached its lowest point since May 2023.
  
• Gold was slightly positive, up 0.1%, while oil experienced a 1.6% decline, with WTI dropping below the psychological support of $90.

Chart of The Day: 2-Year Treasury Yields Rise To 16-Year Peak As Fed Sticks To Higher-For-Longer Stance

Stock Movers

Among S&P 500 mega caps, the worst performers included:

• Intel Corp. INTC, down by 4.6%.
• Alphabet Inc. GOOG GOOGL, down 3%.
• Nvidia Corp. NVDA, down 2.9%.
• Netflix Inc. NFLX, down 2.4%.
• Microsoft Corp. MSFT, down 2.2%.

Read more: Countdown To US Government Shutdown: How Could It Impact The Stock Market?

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