* Major U.S. indices open sharply lower
* Treasury yields rise; dollar near two-month highs
By Huw Jones and Pete Schroeder
LONDON/WASHINGTON, June 18 (Reuters) – Wall Street opened
lower on Friday as investors reassessed their stance after the
Federal Reserve projected interest rate hikes arriving sooner
than once thought, while the dollar and U.S. Treasury yields
continued to gain ground.
All three major U.S. indices opened down, with the Dow Jones
Industrial Average off 382.96 points, or 1.13%, the S&P
500 down 32.76 points, or 0.78%, and the Nasdaq Composite
losing 63.01 points, or 0.44%.
The MSCI world equity index, which tracks
shares in 45 nations, fell 6.43 points or 0.9%.
The sell-off in the U.S. sharpened after St. Louis Federal
Reserve President James Bullard told CNBC that inflation was
more intense than expected. His remarks came two days after Fed
officials projected interest rate hikes as soon as 2023, even
while vowing to keep up strong monetary support while the
Following Bullard’s comments, the U.S. dollar index
jumped to 92.270, the highest in more than two months, and U.S.
10-year Treasury yields climbed back above 1.5% after Thursday’s
“It’s a bit of dust settling, with no panic and the grown-up
reaction is encouraging,” said Ned Rumpeltin, European head of
currency strategy at TD Securities.
While the Fed’s messaging on Wednesday indicated no clear
end to supportive policy measures such as bond buying, signals
of sooner-than-expected rate hikes indicated its concern about
inflation as the U.S. economy recovers from the COVID-19
Friday is also “quadruple witching day” on Wall Street, when
options and futures on stocks and stock indexes expire, which
can trigger volatility in markets near the close of trading.
The dollar was heading for its best week in nearly nine
months as investors priced in sooner-than-expected ending to
extraordinary U.S. monetary stimulus.
Strength in the greenback pushed oil lower for a second
straight session, while spot gold remained down around 5% for
the week after the Fed dented the yellow metal’s safe-haven
In Europe, the pan-European STOXX index dropped
1.31% to 453.34 point, down from Monday’s record high of 460.51.
“What is pretty obvious is that the inflation genie is
starting to sneak out of the bottle, and that will be a major
driver of interest rates in the short-to-medium term,” said
James McGlew, executive director of corporate stockbroking at
Argonaut in Perth.
In Europe, analysts were already asking if the Bank of
England, whose monetary policy committee meets next week, will
follow in the Fed’s footsteps and adopt a more bullish tone on
the economy and what that would mean for UK stimulus and
Gold prices, which plunged following the Fed’s statement,
edged higher but were still set for their worst week since March
2020. Spot gold was last up 0.1% at $1,775 per ounce.
Higher expectations of inflation continued to lift
long-dated U.S. Treasury yields. Benchmark 10-year notes
Oil prices took a hit from the strong dollar as concerns
over demand and new Iranian supply weighed.
Global benchmark Brent crude was down 0.04% at
$73.06 a barrel after settling at its highest price since April
2019 on Wednesday. U.S. West Texas Intermediate crude,
which touched its highest level since October 2018 on Wednesday,
was up 0.37% to $71.29.
(Additional reporting by Thyagaraju Adinarayan, Andrew
Galbraith and Tom Westbrook; Editing by Alexander Smith, Mark
Potter and Dan Grebler)