S&P, Nasdaq close lower as Fed concerns remain

The S&P 500 in Nasdaq fell for a second straight session on Wednesday. Treasury yields jumped after manufacturing data indicated inflation is likely to remain stubbornly high, while comments from Federal Reserve policymakers supported more interest rate hikes. The Dow, alone among the major indices, finished a hair higher. It got a boost from Caterpillar, which saw its shares rise after the construction equipment maker said it had reached a tentative deal with a union that represents workers at four of its facilities. But the Nasdaq lost two-thirds of 1 percent, while the S&P 500 dropped about half of 1 percent. The yield on 10-year nodes topped 4 percent for the first time since November, after the Institute for Supply Management's survey showed U.S.

manufacturing contracted in February and prices for raw materials increased last month. Fanning fears about persistent inflation and rising interest rates, Minneapolis Fed President Neil Kashkari, a voter in the ratesetting committee in 2023, said he is open-minded on either a 25-basis point or a 50-basis point rate hike in March. On a similar note, Atlanta Fed President Rafael Bostek wrote that Fed policy would have to remain tight well into 2024. These statements from Fed members come as no surprise to Johann Gahn, head ETF market strategist with Allianz Investment Management. They're going to keep their steady hand on the hawkish tiller in this case, pushing the rates up further. They're going to keep the rates up there for longer. They would much rather be wrong by cutting rates late.

In other words, inflation, that way they can win the inflation war, but it would be at the expense of a potential recession. They'd rather do that than to cut rates early, in other words, aiming for a soft landing. But at the same time, having resurging inflation risk on the back of that. Besides Caterpillar, other stocks of note include Tesla, which dropped ahead of its investor day event. The electric automaker is readying a production revamp of its top-selling Model Y Reuters reported, citing people familiar with the plan. Also, Novavax, which plunged after the COVID-19 vaccine maker, raised doubts about its ability to remain in business and announced plans to slash spending as it prepares for a fall vaccination campaign.

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