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Treasury yields jump, Wall Street falls after Fed decision

Reuters  |  NEW YORK 

By Nick Brown

(Reuters) - yields jumped and Wall Street reversed earlier gains to close lower on Wednesday, after the Federal Reserve raised interest rates and signalled that two more hikes could be coming this year.

Ten-year note yields hit a one-week high, while two-year note yields rose to a three-week peak after the Fed's decision to raise its benchmark overnight lending rate a quarter of a percentage point, to a range between 1.75 percent and 2 percent.

Policymakers also projected a slightly faster pace of rate increases in the coming months, with two additional hikes expected by the end of this year, compared to one previously.

Benchmark 10-year notes last fell 6/32 in price to yield 2.9774 percent, from 2.957 percent late on Tuesday.

The 30-year bond last fell 3/32 in price to yield 3.0967 percent, from 3.092 percent Tuesday.

The dollar index, which measures the greenback against a basket of currencies, <.DOXY> fell 0.24 percent, with the euro up 0.41 percent to $1.1791.

"There was some question about the December rate hike and it looks like the Fed is sticking to that plan and I would say this is a very mild negative for risk markets," said Matthew Forester, at in King of Prussia,

"Each rate hike becomes more difficult for the risk markets and the real to digest."

The Dow Jones Industrial Average <.DJI> fell 119.53 points, or 0.47 percent, to 25,201.2, the <.SPX> lost 11.22 points, or 0.40 percent, to 2,775.63 and the <.IXIC> dropped 8.10 points, or 0.11 percent, to 7,695.70.

The losses came on a day Wall Street had opened slightly in the black, after a court approved AT&T's $85-billion takeover of after the closing bell on Tuesday.

shares jumped 1.73 percent after approval of the deal, which is expected to trigger other corporate takeovers, and dropped 2.13 percent.

Focus now turns to policy meetings later this week at the and the

"The Fed isn't the biggest here," said Stephen Massocca, at in "If the ECB or the begin tightening it'll have a bigger impact than the Fed."

Trade tensions are also weighing on markets, as the U.S. prepares to unveil more tariffs on $50 billion worth of Chinese goods.

The pan-European index <.FTEU3> rose 0.09 percent and MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.26 percent.

Emerging market stocks lost 0.61 percent.

Trade tensions were pressuring the Mexican peso and Canadian dollar, which bounced back and forth against the U.S. dollar, last gaining 0.18 percent and 0.22 percent, respectively, versus the greenback.


Oil prices, which had started the day in the red, settled higher after a report by the indicated U.S. crude inventories fell more than anticipated last week and gasoline and distillate stocks surprised with declines.

U.S. crude settled up 0.42 percent, at $66.64 per barrel, while Brent gained 1.13 percent on the day, settling at $76.74.

"The demand metrics here are amazing for and gasoline," said John Kilduff, a partner at in "Put the exports of crude on top of that, and it's just a really bullish report."

bonds were in demand, as well, after Paolo Savona, the country's new EU Affairs Minister, said the euro was "indispensable."

The comments by Savona, who has previously expressed hostile views on the euro, followed statements earlier in the week by Italy's new coalition government that it had no plans to leave the euro zone.

In another reminder of the danger of trade disputes, shares in Chinese <0763.HK> fell as much as 41.5 percent, wiping $3 billion off its market value, as it resumed trade after agreeing to pay up to $1.4 billion in penalties to the

(Additional reporting by Gertrude Chavez-Dreyfuss, Jessica Resnick-Ault, Sruthi Shankar, and Jason Lange; Editing by and Chris Reese)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, June 14 2018. 02:11 IST