Wall Street stocks tumble amid rate hike jitters

div classBodysc17zpet90 cdBBJodivpReuters – All three Wall Street benchmarks fell more than 2 on Friday, stumbling towards the end of a week which has seen whipsaw moves caused by surprise earnings news, increased certainty around aggressive nearterm interest rate rises and concern that farright French presidential candidate Marine Le Pen could win an upset victory over incumbent Emmanuel Macron in Sundays election. [.N] p

pMARKET REACTION:pdivdivdiv classBodysc17zpet90 cdBBJodiv

p STOCKS: Dow down 2.71, S&P 500 down 2.65, Nasdaq down 2.42p

p BONDS: The yield on the benchmark 10year note fell to 2.9025. [US]p

p FOREX: The dollar index rose 0.527 [FRX]p

p VIX: The VIX was up 23.5 at 28.01 and touched its highest level in more than a monthp

pCOMMENTS:p

pJOHN LYNCH, CHIEF INVESTMENT OFFICER, COMERICA WEALTH MANAGEMENT, CHARLOTTE, NC emailp

pThe combination of Jerome Powells comments and some disappointing earnings news was too much for investors to handle heading into the weekend. Moreover, marketbased breakeven inflation expectations are climbing, providing a more powerful statement on the potential for persistent pricing pressures than headlines have been suggesting.p

pWe believe the concerns over the likelihood of 50basis point rate hikes at the next two FOMC meetings is an overreaction. Approximately 150 billion in securities on the Feds balance sheet are maturing over the next few months, suggesting the central bank could still be purchasing up to 100 billion in bonds, essentially offsetting any impact from the interest rate moves.p

p“In the months ahead, though, balance sheet reduction will not require elevated asset purchases, providing a better lever for the Fed to pull regarding rates and runoff.”p

pSTEPHEN MASSOCCA, SENIOR VICE PRESIDENT, WEDBUSH SECURITIES, SAN FRANCISCO “The market has concerns inflation is going to prompt central banks to tighten further and faster than investors are comfortable with and that it will have a negative effect on asset pricing including stocks,” “Inflation is starting to have an impact on corporate earnings and we saw that today.” p

p“Its starting to be pervasive.” THOMAS HAYES, CHAIRMAN, MANAGING MEMBER, GREAT HILL CAPITAL LLC, NEW YORKp

pThis has nothing to do with Fed and interest rates. The one thing that no one is talking about is the French election on Sunday. There is a lot of fear in Europe that Le Pen gets elected. Le Pen is a populist who‘d be potentially antieuro and the fear is that it could be a shock along the magnitude of what Brexit was. Because if Le Pen wins, the knockon implication is that they might withdraw from the European Union or that would be a possibility that’s on the table. p

p“No one‘s thinking about that. It was evident with the selling into the 11:30 a.m. close in Europe and then it carried through with margin calls in the U.S. through 2:30 p.m. No we’re getting a little relief, not much, after the margin calls at 2:30 p.m. This is all about the election on Sunday because that would be a something that nobodys pricing in.”p

pJAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA emailp

pMarkets are very uneasy about the growing likelihood of a policy error by the Federal Reserve. When a Fed official suggests a 50 basis points hike, markets immediately start trying to price in 75 basis point hikes. Its madness really. Most investors would be well served to ignore the machinations of the pricing craziness and wait to see what actually happens with rates.p

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pp Compiled by the Global Finance & Markets Breaking News teamp

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