Wall Street slides as Fed delivers hawkish hike; FNZ chief departs
New Zealand’s GDP data looms large today.
Stocks on Wall Street tumbled after Federal Reserve chair Kevin Warsh reiterated the central bank’s focus on reining in accelerating inflation after policymakers delivered the expected quarter-point rate hike and signalled at least one more was on the way.
Meanwhile, artificial intelligence-linked companies were mixed with chipmakers broadly stronger amid reports that Intel and SK Hynix investigated ways to make semiconductors in the US and that Apple was eyeing Nvidia tech to underpin its own enterprise AI server.
FNZ chief executive Blythe Masters stepped down from the Kiwi-born fintech after its recent capital raising to fuel its push into the US.
And Statistics New Zealand’s June gross domestic product figures today are expected to show the economy avoided a contraction through the eruption of the Middle East conflict.
A hawkish tilt
The federal open market committee unanimously voted to raise the federal funds rate a quarter point to a range of 3.75%-to-4%, with the majority of members projecting at least another increase this year in their dot plot guidance.
Chair Warsh said inflation had been too high for too long, and that the rate increase would support a return to the Fed’s 2% inflation target in a timelier fashion.
The hawkish tone in Warsh’s press conference knocked stocks on Wall Street, with the Dow Jones sliding 1.5% in late trading, with Boeing, International Business Machines and American Express at the bottom of the leaderboard. The S&P 500 fell 0.8% and the tech-heavy Nasdaq Composite declined 0.4%.
“The updated projections show 16 of 18 policymakers see scope for at least one more hike this year,” Moomoo market strategy consultant Greg Boland said in a note. “That has left Wall Street unsettled.”
AI-linked stocks bounced back from their recent declines, with reports that Apple was in talks with Nvidia to use the chipmaker’s technology for an enterprise server using the iPhone maker’s own chips, while SK Hynix said it was exploring ways to boost its global competitiveness after reports that it might team up with Intel to make semiconductors in the US.
Reuters reported rogue agents from OpenAI hijacked Hugging Face user accounts as early as May, nearly two months before the July breach, while the Financial Times reported that promises by OpenAI and Anthropic to slow AI development were creating internal tensions.
Easing oil
European markets rallied ahead of the Fed decision as oil prices eased, with Brent crude oil futures falling 2.7% to US$105.87 a barrel at 7.30am. The UK’s FTSE 100 increased 0.3%, while Germany’s DAX rose 0.5% and France’s CAC 40 advanced 0.6%.
The Bank of England is expected to keep its benchmark rate at 3.75% at its upcoming review.
Meanwhile, Oklahoma-based Continental Resources signed a tentative agreement to explore a Venezuelan oil field in response to the White House’s call for firms to help revive the Latin American nation’s oil sector.
American Airlines and United Airlines said they were preparing to trim their schedules in the face of elevated fuel prices, and Union Pacific said soaring diesel prices were prompting a shift of more US freight from trucks to rail.
European Union president Ursula von der Leyen said she would work to make Canada the bloc’s first associate member, saying the continent needed to work with like-minded nations.
FNZ announced the departure of chief executive Blythe Masters, with chair Stephen Welch stepping in as executive chair while the fintech searched for a permanent replacement. Masters would support the firm in an advisory capacity for six months.
The souring mood is set to carry through to the antipodes, with futures pointing to a 0.9% slide for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar fell to 57.08 US cents at 7.30am in Auckland from 57.44 cents yesterday.
Boland said New Zealand’s S&P/NZX 50 index could come under pressure after the Fed meeting.
“For New Zealand investors, the Fed's message matters because higher US rates feed directly into global bond yields, currencies and equity valuations,” he said.
The local bourse will face the added headwind of companies going ex-dividend today, including a2 Milk Co, Tourism Holdings and Port of Tauranga.
Stats NZ’s June quarter GDP figures are due today, with economists predicting a 0.1% expansion.
