# Wall Street slips, dollar gains as Fed seen hiking rates in May
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-10
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: US Stock Indexes Fall, Dollar Rises on Rate Hike
Meta Description: Get the latest update on US stock indexes and currency market movements after strong jobs data hint at a potential Fed rate hike in May.
URL: https://financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-mayhtml

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By Herbert Lash

NEW YORK (Reuters) – U.S. [stock indexes fell and the dollar](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides") rose on Monday after strong jobs data last week suggested the Federal Reserve will hike interest rates in May, while the yen weakened after Japan’s new central bank governor vowed to maintain ultra-loose policy.

Gold prices slipped below the key $2,000 level due to a resurgent dollar, while Treasury yields rose on growing market expectations that the Fed will [hike rates](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") when policymakers conclude a two-day meeting on May 3.

Consumer price index data on Wednesday will encourage the market to see a [rate hike](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") next month, but the more important data will be Thursday and Friday when reports will show the extent of banks’ emergency funding, said Marc Chandler, chief market strategist at Bannockburn Global Forex, in New York.

My sense is that the labor market and CPI would favor the [Fed raising rates](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") again. However, what has made the [market have second](https://www.financedigest.com/mallorca-property-market-hots-up-as-pre-brexit-british-buyers-snap-up-second-homes.html "Mallorca property market hots up as pre-Brexit British buyers snap up second homes") thoughts is the extent of the tightening of lending,” he said.

“We saw in the last two weeks there’s a record decline in commercial and industry loans,” he said.

[Futures show a 69.3% likelihood the Fed will raise rates](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") by 25 basis points in May, according to CME Group’s FedWatch tool.

With recession worries mounting, investors are betting the tumult in the banking system sparked by the sudden collapse of [Silicon Valley](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources") Bank on March 10 will tighten credit conditions.

But traders also are betting that the Fed will [cut rates in the second](https://www.financedigest.com/meta-to-cut-10000-jobs-in-second-round-of-layoffs.html "Meta to cut 10,000 jobs in second round of layoffs") half to ward off an economic downturn.

[Minutes of the Fed’s](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes") policy meeting in March are also scheduled to be released on Wednesday.

Trading was light as markets were closed in Europe, Australia and [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") for Easter.

The dollar index rose 0.735% and the two-year [Treasury yield](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"), which typically moves in step with interest rate expectations, added 3.6 basis points to 4.008%.

On [Wall Street](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"), the Dow Jones Industrial Average fell 0.11%, the S&P 500 lost 0.57% and the Nasdaq Composite dropped 0.92%.

The [dollar extended its gains against the yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles") to hit 133.835, the highest since March 17, on receding expectations of a near-term tweak to Japan’s ultra-loose monetary policy.

Japan’s new central bank governor Kazuo Ueda said it was appropriate to maintain the [bank’s policy for now as inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries") has yet to hit 2% as a trend, suggesting he will be in no rush to dial back its massive stimulus.

The yen was last 1.26% [weaker at 133.83 per dollar](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker").

[Asian shares](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") were little changed overnight with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.05%.

China shares slipped, with the blue chip CSI300 Index 0.32% lower and the Shanghai Composite Index [easing 0.16% amid rising](https://www.financedigest.com/oil-falls-as-earthquake-impact-on-crude-eases-rate-hike-fears-rise.html "Oil falls as earthquake impact on crude eases, rate hike fears rise") geopolitical tensions around the Taiwan Strait.

China announced three days of drills on Saturday, after Taiwan’s [President Tsai Ing-wen returned to Taipei following a meeting](https://www.financedigest.com/statement-by-imf-first-deputy-managing-director-david-lipton-on-meeting-with-egypts-president.html "Statement by IMF First Deputy Managing Director David Lipton on Meeting with Egypt’s President") in Los Angeles with U.S. House of Representative Speaker Kevin McCarthy.

Spot gold dropped 1.1% to $1,985.94 an ounce.

U.S. crude fell 0.19% to $80.55 per barrel and Brent was at $84.88, down 0.28% on the day.

(Reporting by Ankur Banerjee; Editing by Kirsten Donovan)


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