Stocks drop on the hawkish federal reserve.

North American equities sold off on Friday on the much-anticipated hawkish tone coming from Federal Reserve Chair Jerome Powell, which underlined the determination of the officials to continue their efforts to combat inflation. The markets were betting that the mixed economic data and the elevated risk of a recession may push the central bank to pivot to a more balanced approach. The sell-off intensified in the final hour, with S&P 500 and Nasdaq losing 3.20% and 3.94%, respectively, and Canada’s S&P/TSX Composite declining 1.49%.

 

The US two-year Treasury yields, reflecting the immediate decision of the central bank, climbed higher. The higher rates also translate into a stronger US dollar which has already outperformed all the other major currencies, with the DXY index at 108.8. Japanese Yen and Swedish Krona have been the worst-performing major currencies, down 16.2% and 15.35%, respectively.

 

Commodity prices continue to trend lower, with oil prices coming off the 120 of the last month to 93 a barrel on Friday and gold hovering around 1,737 per ounce. Cryptocurrencies were not immune, with Bitcoin and Ethereum losing over 5% on Friday to U20,650 and U1,560, respectively.