Thursday 17 June 2021 2:31 pm

US stocks fall as Fed's taper talk drags down tech shares

Tech stocks dragged Wall Street lower today after the Fed hinted at tapering its stimulus sooner than expected, piling pressure on a sector that is vulnerable to higher interest rates.

The tech-heavy Nasdaq fell by 0.25 per cent at the open, while the Dow Jones Industrial Average was down 0.1 per cent.

Meanwhile, the S&P 500 opened flat, remaining near an all-time time.

The drops came after the Federal Reserve last night indicated that its first post-pandemic interest rate hikes could come in 2023.

Although the US central bank kept its current interest rate at the lowest possible levels, the majority of the Fed’s officials predicted at least two 0.25 per cent rate rises in 2023.

“In the short run, tech will have a harder time outperforming the cyclicals only because the Fed is hinting at raising interest rates,” said Tom Mantione, managing director at UBS Private Wealth Management.

London markets

London’s FTSE 100 fell today after the Fed’s hawkish turn hit commodity prices, knocking the index off a 16-month high.

The blue-chips were down 0.5 per cent this afternoon, with miners falling nearly two per cent as metal prices slipped after the Fed signalled an early change to interest rates.

However, airlines including British Airways owner IAG and EasyJet soared by up to 2.9 per cent after Britain said it may allow double-jabbed travellers to enjoy a foreign holiday.

Premier Inn owner Whitbread also shot up after it said hotel bookings had accelerated in the run-up to summer.

Meanwhile, the domestically focused mid-cap FTSE 250 dropped by 0.6 per cent.

Market movers

The afternoon’s biggest winner was British Airways owner IAG, who rose 2.9 per cent, followed by Premier Inn owner Whitbread, up by 2.6 per cent.

BT Group and events firm Informa also rose by 1.9 per cent and 1.5 per cent respectively.

Safety equipment company Halma was the afternoon’s biggest faller, dropping by six per cent, followed by miner Polymetal’s 3.4 per cent hit.

Meanwhile, Hikma Pharmaceuticals and private equity group 3i both dipped by 3.3 per cent and 3.2 per cent respectively.

Around the world

Asian equities hit a three-week low today after the Fed stunned investors by signalling it might raise interest rates at a faster pace than assumed.

Japan’s Nikkei fell by one per cent, but Chinese blue chips rose 0.4 per cent.

“This time there was no denying it, the Federal Reserve took its first tentative steps on a more hawkish path. It was instantly felt in markets,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson.

Elsewhere, the EuroStoxx 50 traded 0.2 per cent lower this afternoon, while the German Dax was flat.