Stock Market Today: Dow Falls, Oil Slumps as Investors Consider Rate

Overseas, the pan-European

Stoxx 600
was 1.2% lower and Hong Kong’s

Hang Seng Index
fell 1.2%.

The renomination of Jerome Powell as Chair of the Federal Reserve has prompted investors to bring forward their expectations of when the central bank will first hike rates. Under Powell, who promised in a press conference with President Joe Biden to focus on fighting inflation, markets see an initial rate increase around to June 2022.

Powell was viewed as the favorite to lead the central bank for the next four years, while runner-up Lael Brainard—a Fed Governor who has been nominated as Vice Chair—was viewed as someone who would lead the Fed in a more dovish direction.

“Quite how the market is reading so much into this reappointment is kind of hard to work out,” said Neil Wilson, an analyst at broker Markets.com. 

“Bond yields ticked up, with the policy-sensitive two-year note rising to its highest since March 2020; the dollar rose to a new 16-month high and has held gains as of this morning; gold tumbled as yields climbed; financials and energy rose and tech stocks fell, dragging the broad market lower,” Wilson said.

Compounding considerations of rate increases—and inflation fears that simmer under the surface—stocks have also been hit by a resurgence of Covid-19 in Europe, where Austria headed into a new national lockdown Monday. In Germany, the region’s largest economy, Chancellor Angela Merkel said the current surge in coronavirus infections is worse than anything the country has seen so far in the pandemic.

“A winter Covid-19 wave, energy supply concerns, and inflation worries are all potential sources of volatility in the months ahead,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management. “But equity markets’ relatively calm reaction suggests a willingness to look through these…