US equities ended lower on Wednesday, with the S&P 500 falling 0.73% and the Dow Jones Industrial Average shedding over 700 points, or 1.42%, while the Nasdaq Composite declined 1.05%, according to a report from Business-Today. The declines came as investors awaited the outcome of the Federal Reserve's latest policy meeting on interest rates, while a sharp rise in oil prices added to inflationary worries.
Oil prices surge on geopolitical tensions
Brent crude jumped 5.6% to $86.64 a barrel after fresh hostilities involving Iran, according to Business-Today. Iran launched a missile attack on US forces in the Middle East, while US forces, alongside Saudi Arabia, carried out strikes on Iran-backed militias in Iraq. The escalation raised concerns over global oil supplies.
Oil prices have been highly volatile in recent weeks. Business-Today noted that Brent crude had fallen to around $72 a barrel earlier this month before briefly touching $102 last week, as uncertainty persisted over whether Washington and Tehran could reach an agreement allowing unimpeded oil shipments from the Middle East.
Federal Reserve rate decision in focus
The renewed rise in crude prices has fuelled concerns that inflation could accelerate again after showing signs of easing faster than expected, according to the report. That uncertainty has complicated expectations ahead of the Federal Reserve's interest rate decision at the conclusion of its two-day policy meeting, Business-Today reported, citing an AP report.
Markets are currently assigning about a 36% probability to a US rate hike, which, if delivered, would mark the first increase in three years. While higher interest rates help curb inflation, they can also dampen economic activity and weigh on equity valuations, the report said.
Tech stocks under pressure
Technology stocks, particularly companies viewed as richly valued, remained under pressure. Business-Today reported that investors have become increasingly cautious about semiconductor manufacturers and other beneficiaries of the artificial intelligence boom, amid concerns that the rapid pace of earnings growth may not be sustainable if AI fails to deliver the expected gains in profitability and productivity.
The shift in sentiment was especially evident in South Korea, where the stock market is heavily influenced by Samsung Electronics and SK Hynix. The KOSPI index fell another 6% after plunging 10.8% in the previous session, reducing its gains for the year to 34.4%.
SK Hynix shares dropped 9.6%. Although the company reported record quarterly revenue and profit driven by strong AI-related demand, its 257% revenue growth still failed to meet analysts' expectations, according to Business-Today.
Global markets mixed
Elsewhere, global markets presented a mixed picture. Hong Kong's Hang Seng index advanced 2%, while France's CAC 40 declined 0.7%, Business-Today reported.
Bond market reaction
In the bond market, US Treasury yields moved slightly higher alongside rising oil prices. The yield on the benchmark 10-year Treasury note inched up to 4.62% from 4.61% at Tuesday's close, according to the report.
The next major milestone for markets is the Federal Reserve's interest rate decision, due later today following the conclusion of its policy meeting.
Sources:
