Hawkish sentiment from Federal Reserve officials weighed on stocks and buoyed Treasury yields, giving markets a disappointing start to March.
Minneapolis Federal Reserve President Neel Kashkari said Wednesday he's "open-minded" about raising interest rates by either 25 or 50 basis points. Kashkari, who is a voting member on the Federal Open Market Committee, added he might hike rates even further. "I would continue to push up my policy path," he said. Atlanta Fed President Raphael Bostic said he's comfortable with the 5% to 5.25% target proposed by the FOMC last year – but he warned rates would need to remain high "until well into 2024."
The S&P 500 lost 0.47% and the Nasdaq Composite dropped 0.66%. The Dow, however, managed to hold steady. "We are currently in the … period between central banks winding down interest rate increase cycles and seeing what impact those increases will have on the real economy," said William Northey, senior investment director at U.S. Bank Wealth Management.
February's ISM Manufacturing Index gave a clue of what that impact looks like. The reading came in at 47.7%, meaning that the overall manufacturing sector contracted in February — for the fourth consecutive month. Employment in the sector also dipped. That's good news for Fed officials worried about an overheating economy and labor market. But the devil's in the details: The report showed that prices paid by manufacturers increased from January. Inflation isn't done with the industry just yet.
