# Stocks shed gains, Treasury yields jump as Fed signals rate hikes could come ‘soon’
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-01-27
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: US Stocks Retreat After Fed Signals Rate Hike
Meta Description: U.S. stocks dropped after Fed signals rate hike, while oil prices soar amid Russia-Ukraine tension. Get updates on market reactions and more.
URL: https://financedigest.com/stocks-shed-gains-treasury-yields-jump-as-fed-signals-rate-hikes-could-come-soonhtml

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By Pete Schroeder

WASHINGTON (Reuters) – U.S. stocks retreated Wednesday, erasing strong gains, after the Federal Reserve signaled an interest [rate hike](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") could be coming soon, while supply concerns stemming from tension between Russia and Ukraine saw oil prices touch highs not seen since 2014.

[Wall Street](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") ended the day in mixed territory after spending most of the day up roughly 2%. Stocks shed those gains following an afternoon policy update from the Fed and [press conference](https://www.financedigest.com/5-top-tips-when-holding-a-crisis-press-conference.html "5 Top Tips When Holding a Crisis Press Conference") by Fed Chairman Jerome Powell, which suggested the Fed would push forward with interest rate hikes.

The Dow Jones [Industrial Average closed](https://www.financedigest.com/leading-blockchain-firm-to-unveil-decentral-project-at-official-consensus-industry-closing-event.html "Leading Blockchain Firm to Unveil Decentral Project at Official Consensus Industry Closing Event") down 0.38%, while the S&P 500 fell 0.15% and the Nasdaq Composite gained just 0.02%.

The MSCI world [equity index](https://www.financedigest.com/six-securities-services-launches-new-equity-index-baskets.html "SIX Securities Services launches new Equity Index Baskets"), which tracks shares in 45 nations, was largely flat.

In its latest policy update, the [Fed signaled it is likely to raise](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") U.S. interest rates in March and reaffirmed plans to end its [bond purchases that month before launching a significant reduction in its asset](https://www.financedigest.com/analysis-watch-out-risk-assets-the-rout-in-bonds-is-coming-your-way.html "Analysis-Watch out risk assets, the rout in bonds is coming your way") holdings.

In the follow-up press conference, Powell warned that [inflation remains above the Fed’s](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") long-run goal and supply chain issues may be more persistent than previously thought. [Stocks turned negative during his comments](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build"), as some investors bet the Fed would prioritize fighting inflation over ensuring robust economic growth.

The market took notice of the stress the [Fed](https://www.financedigest.com/stocks-up-bond-yields-fall-as-markets-mull-a-fed-policy-pause.html "Stocks up, bond yields fall as markets mull a Fed policy pause") Chair put on the inflation side of the equation combined with his stressing of the tight labor market. This implies that the [Fed could be comfortable with some reduction in the pace of overall economic growth,” said Russell Price](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes"), chief economist at Ameriprise Financial Services.

The Fed also said its policy-setting members had agreed on a [set of principles for shrinking its balance sheet, set to start sometime after interest hikes](https://www.financedigest.com/bank-of-england-set-to-hike-to-4-as-rate-peak-looms.html "Bank of England set to hike to 4% as rate peak looms") begin. The Fed’s balance sheet roughly doubled in size during the pandemic to nearly $9 trillion, as it snapped up [bonds to help keep longer-term interest rates](https://www.financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-ease.html "Stocks, bonds extend rally on hopes rate hikes ease") down to support the economy.

U.S. [Treasury yields rose as the Fed](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks") issued its update. The U.S. [Treasury 2-year yields](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") hit their highest level since February 2020. The benchmark U.S. 10-year [yield climbed](https://www.financedigest.com/stocks-climb-yields-fall-with-dollar-on-inflation-data.html "Stocks climb, yields fall with dollar on inflation data") to 1.8709% shortly after the Fed statement.

The [dollar hit a three-week high after the Fed](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") news. The dollar index, which tracks the greenback versus a [basket of six currencies](https://www.financedigest.com/the-yuan-makes-its-official-entry-into-rawbanks-currency-basket.html "The yuan makes its official entry into RAWBANK’s currency basket"), rose 0.58%.

Spot gold prices were down 1.64% to $1,817.31 an ounce.

OIL TOUCHES SEVEN-YEAR HIGH

Growing tension as Russian troops massed on Ukraine’s border continued to [push oil prices higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") amid concerns of supply disruption, with oil clearing $90 a barrel for the first time since 2014.

U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invaded Ukraine, as Western leaders stepped up military preparations and made [plans to shield Europe from a possible energy](https://www.financedigest.com/uk-energy-regulator-drops-plan-to-ring-fence-customers-cash.html "UK energy regulator drops plan to ring fence customers’ cash") supply shock.

Brent crude ended up 1.55% to $89.57 a barrel. U.S. crude ended up 1.65% at $87.01 per barrel. (This story corrects headline to clarify that [yields jumped)](https://www.financedigest.com/stocks-jump-as-treasury-yields-ease-and-oil-prices-sell-off.html "Stocks jump as Treasury yields ease and oil prices sell off")

(Additional reporting by Sinead Carew; Editing by Marguerita Choy, Alistair Bell and Chizu Nomiyama)


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