Stocks fall as Fed delivers hawkish rate hike
Global stocks fell after the US Fed raised interest rates for the first time in three years, while bond yields rose as investors expected more rate hikes.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, Sep 16, 2026. (Photo: REUTERS/Jeenah Moon)
NEW YORK: Global stocks fell on Wednesday (Sep 16), reversing gains from early trade, while US government bond yields rose after the US 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 favour of the move.
The US central bank's decision is aimed at addressing inflation driven partly by higher oil prices.
On Wall Street, all three indexes gave up gains in early trade and were trading lower with energy and financials the main drag.
The Dow Jones Industrial Average fell 1.3 per cent, the S&P 500 fell 0.69 per cent and the Nasdaq Composite lost 0.37 per cent.
"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. "
Concerns over rising inflation and higher government bond yields had weighed on equities in the previous two sessions.
MSCI's global equities index fell 0.52 per cent, 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 per cent. Britain's FTSE 100 index added 0.28 per cent while benchmarks in Germany, France and Spain also saw gains.
US yields rose, with the 2-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 7.07 basis points to 4.734 per cent.
The yield on benchmark US 10-year notes rose 1.21 basis points to 5 per cent.
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 per cent to settle at US$105.83 a barrel.
In currencies, the dollar gained against major peers including the euro and the yen following the Fed's decision.
The euro was down 0.64 per cent at US$1.147.
The Japanese yen weakened 0.47 per cent against the greenback to 155.99 per dollar.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.57 per cent to 100.25.
In cryptocurrencies, bitcoin fell 0.22 per cent to US$75,729.93 as it continued reeling from the US Senate's decision to vote against advancing comprehensive cryptocurrency legislation backed by President Donald Trump.
Spot gold fell 1.19 per cent to US$4,241.59 an ounce.
