Commentary: equities decline as Fed changes forecasts
After leaving the rates unchanged on a Wednesday meeting, the US Federal Reserve surprised markets by anticipating higher rates for longer period. Even though only a single rate hike is still expected this year, the cutting cycle is now expected to be slower in both 2024 and 2025. As a result, treasury yields rose to multiyear highs, while S&P 500 delivered the largest daily loss since March this year. The 2, 10, and 30 year US treasuries are now offering 5.10%, 4.44%, and 4.53% yields, respectively.
Tech stocks were the weakest performers, as illustrated by -3.6% decline of Nasdaq 100 index, a benchmark for technology stocks. Among S&P 500 stocks, the decline was rather symmetric across sizes, as both the market-cap weighted and equal weighted indices fell by -2.9%. Generally, the small-cap growth stocks underperformed the most, declining by -3.9% w/w, while the large value stocks were the best performing category with -2.6% fall. Among sectors, the defensives held up relatively well, while cyclicals (e.g., real estate and technology) saw sizeable declines.
