US Stockmarkets Suffer Worst Month In Over Two Years

US stockmarkets suffer worst month since January 2016

US stockmarkets suffer worst month since January 2016

A late slump in US stocks on Wednesday driven by continued fears of faster-than-anticipated rate hikes caused the Dow Jones and S&P 500 to suffer their worst month since January 2016.

The S&P 500 and Dow Jones were down 1.1% and 1.5% respectively by market close on Wednesday, causing the S&P 500 to drop 3.9% in February marking its first monthly drop since March 2017, thereby ending a market rally last seen between March 1958 and January 1959.

With the Dow Jones falling 4.3% for February, this marks the end of one of the longest winning streaks in US market history.

The fall was largely driven by new Federal Reserve Chairman Jerome Powell's unexpectedly hawkish tone on Tuesday where he presented an upbeat picture of the US economy, opening up the option for more than three rate rises this year as inflation moves "up to target".

"We have seen some data that in my case will add some confidence to my view that inflation is moving up to target," Powell said.

"We have also seen continued strength around the globe. And we have seen fiscal policy become more stimulative. So I think each of us is going to be taking the developments since the December meeting."

Markets are now pricing in a 30% chance of four rate hikes this year, almost triple the levels seen at the start of the month, while attaching a 70% chance of three hikes by the end of the year.

Tom Essaye, founder of the Sevens Report, told CNBC: "The volatility is being caused by one overarching theme: The market does not know what to expect from the Fed.

"There is uncertainty around that and it's going to continue for the next several months."

In the currency markets, the US dollar was buoyed by Powell's comments, rising 0.3% on Wednesday to reach its second-best month of President Donald Trump's term, climbing 1.7% against a basket of currencies overall for the month.

Warning bond and equity market sell-off has further to runas inflation fears build

Elsewhere, the FTSE 100 and Euro Stoxx 50 were both down in mid-morning trading falling 0.6% to 7,188 points and 1% to 3,404 points respectively.

The volatility also spread to Asian markets as the Nikkei 225 and Topix were both down 1.6% in overnight trading.

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