Investing.com - After reaching a record high on Wednesday, Australian shares opened 0.8% lower on Thursday, influenced by the latest policy statement of the U.S. Federal Reserve. The U.S. markets experienced fluctuations as investors sought to understand the implications of the updated rate outlook.
The tech sector led the downturn, with the NYSE Fang + Index falling by 2.9%. This decline was primarily driven by Alphabet (NASDAQ:GOOGL)'s 7.4% drop and at least 2% slides for Microsoft (NASDAQ:MSFT), Meta Platforms, Amazon (NASDAQ:AMZN), and Tesla (NASDAQ:TSLA). Nvidia and Apple (NASDAQ:AAPL) also experienced a decline, just short of 2%.
As anticipated, the Federal Reserve kept its key interest rate unchanged after its meeting. Despite inflation easing over the past year, the Fed noted that it "remains elevated". Powell initially stated that U.S. rates have likely reached their peak and that, in line with the Fed's expectations for the economy, there would be a pullback on rates in the coming year. He also noted that the Fed is in "risk-management mode" to avoid premature or delayed action.
However, Powell later clarified that it was improbable that the policy committee would have enough confidence in the inflation outlook to reduce rates in March. Consequently, the likelihood of a March rate cut dropped to 36.4 late in New York's trading day, a slight decrease from the previous session.
In the commodities market, oil slid below $US82 a barrel, and iron ore fell below $US130 a tonne. Gold saw a slight increase, edging above $US2050 an ounce, while Bank of America (NYSE:BAC) revised its 2024 and 2025 forecasts for lithium prices downward.
Early market moves in New York were partly influenced by the U.S. Treasury's latest quarterly funding plans, which triggered a bond rally that mostly held after the release of the Fed statement. Despite increasing the size of its quarterly issuance of longer-term debt for the third consecutive time, the Treasury stated that it did not anticipate the need for any further increases in nominal coupon or FRN auction sizes for several quarters.
Alphabet, Google's parent company, experienced a 7% drop, which weighed heavily on both the S&P 500 and the Nasdaq Composite. However, these two benchmarks trimmed their losses as Powell spoke.
In other market news, Pinnacle Investment Management and Kelly Partners will release earnings along with a sales update from St Barbara, while Nufarm is set to host an AGM.
Local investors will be closely monitoring building approvals as well as import and export prices.