NEW YORK (AP) — Oil prices got back to jumping on Wednesday, while sinking technology stocks dragged Wall Street lower amid uncertainty about what the Federal Reserve will do to get high inflation under control.
The S&P 500 fell 1.5% after swinging sharply between gains and losses in the last hour of trading. The Dow Jones Industrial Average dropped 1,153 points, or 2.2%, and the Nasdaq composite slumped 1.7% to fall 9.8% below its record set last month.
The action was more decisive in the oil market, where the price of Brent crude leaped 7.3% to settle at $88.09 per barrel after fighting resumed in the war with Iran and raised worries about the global flow of oil.
Brent oil’s price had swung as low as $72 early this month and as high as $102 last week on uncertainty about whether the United States and Iran could reach a deal to allow oil tankers to move freely again from the Middle East to customers worldwide.
The swings have raised worries that inflation will reaccelerate, and traders came into the day betting on a roughly 34% probability that the Fed would raise its main interest rate in the afternoon, according to data from CME Group.
Higher rates can keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.
Fed officials instead voted to keep the federal funds rate steady, though three members of the policymaking committee did want to raise rates. The Fed’s chairman, Kevin Warsh, implied the bond market may already be doing some of the work to restrain inflation, and he pointed to how yields have climbed since the central bank’s last meeting six weeks ago.
He reiterated his commitment to get inflation back to 2% following years of faster-than-hoped increases in prices, but he also stuck to his plan of giving financial markets fewer clues about what the Fed may do with interest rates in the near future.
With less guidance from the Fed, financial markets may be set for more volatile trading amid the uncertainty.
“Did the Fed take an explicit change in its policy rate today?” Warsh asked rhetorically in a press conference following the Fed’s decision. “No, but I think that’s the beginning of the story.”
Treasury yields swiveled up and down following the Fed’s decision and Warsh’s insistence on not guiding the market.
The yield on the two-year Treasury, which closely tracks expectations for Fed action, fell to 4.24% from 4.26% late Tuesday.
But the 10-year Treasury yield, which moves more with expectations for inflation and economic growth in upcoming years, went in the opposite direction. It jumped to 4.68% from 4.61% late Tuesday.
