US benchmark equity indexes fell Wednesday as minutes from the Federal Reserve’s March policy meeting indicated the economy may enter a “mild recession” later this year amid the banking crisis.
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The Nasdaq Composite dropped 0.9% to 11,929.3, while the S&P 500 lost 0.4% to 4,092. The Dow Jones Industrial Average fell 0.1% to 33,646.5. Consumer discretionary led the decliners among sectors, while industrials led the gainers.
Minutes of the Federal Open Market Committee’s March 21-22 meeting released Wednesday showed staff members projected the world’s largest economy might fall into a “mild recession” later in 2023 following the recent failures of two banks, with a recovery expected over the subsequent two years. Silicon Valley Bank and Signature Bank collapsed last month.
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At the meeting, the committee raised its benchmark lending rate by 25 basis points while projecting a 0.4% growth in 2023 US real gross domestic product, down from 0.5% expected in December.
“If banking and financial conditions and their effects on macroeconomic conditions were to deteriorate more than assumed in the baseline, then the risks around the baseline would be skewed to the downside for both economic activity and inflation, particularly because historical recessions related to financial market problems tend to be more severe and persistent than average recessions,” meeting of the minutes showed.
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The US two-year yield fell 9.2 basis points to 3.97% on Wednesday, while the 10-year rate dropped 3.2 basis points to 3.4%.
Government data showed consumer inflation eased in March both annually and monthly. The consumer price index advanced 5% on an annual basis last month, the smallest increase since May 2021, the Bureau of Labor Statistics reported. That was lower than the consensus on Econoday for a 5.2% gain. The gauge rose 6% in February. Monthly inflation slowed to 0.1% in March from 0.4% the previous month, versus expectations for a 0.3% rise.
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Pantheon Macroeconomics Senior US Economist Kieran Clancy said the data will “not prevent the Fed from hiking (interest rates) in May” as officials have made it clear they want to see a run of slowing increases, especially in core services excluding housing.
West Texas Intermediate crude oil jumped 2.1% to $83.27 per barrel.
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In company news, American Airlines Group (AAL) shares tumbled 9.2%, among the steepest decliners on the S&P 500. The carrier updated its first-quarter profit outlook and provided revenue guidance that fell short of Wall Street’s expectations.
Palo Alto Networks (PANW) was up 1.3%, among the best performers on the Nasdaq. The company said Prisma Access achieved Department of Defense impact level 5 provisional authorization, allowing its security technology to protect the department’s agencies.
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Gold rose 0.5% to $2,028.50 per troy ounce and silver gained 1.6% to $25.60 per ounce.
