Currency traders watch their computer monitors near the screens showing the Korea Composite Stock Price Index , left, and the foreign exchange rate between U.S. dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea, Wednesday, March 8, 2023. Asian shares were mostly lower Wednesday as investors fretted that the Federal Reserve might raise raising interest rates faster if pressure stays high on inflation.
Wall Street shuddered Tuesday after Fed Chairman Jerome Powell told lawmakers that the central bank would keep interest rates higher if need be to fight inflation. Wall Street declined as angst over the Fed raised worries about a possible recession down the line. The S&P 500 dropped 1.5% for one of its worst days of the year so far, closing at 3,986.37. The Dow Jones Industrial Average lost 1.7% to 32,856.46, and the Nasdaq sank 1.3% to 11,530.33.
Powell has confirmed some of those fears, saying the data mean “the ultimate level of interest rates is likely to be higher than previously anticipated.” He also said in his testimony to a Senate committee that the Fed is ready to increase the pace of its hikes again if needed. After sitting at virtually unchanged levels just before Powell's testimony, stocks fell immediately afterward.
That’s been most clear in the bond market, where the yield on the 10-year Treasury topped 4% last week and hit its highest level since November. It helps set rates for mortgages and other important loans.The two-year Treasury yield, which moves more on expectations for the Fed, shot up to 5.01% from 4.87% and is at its highest level since 2007.
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