Wall Street saw session of twists and turns on Wednesday, with stocks snapping a three-day rally as earnings from megacap firms highlighted the toll the Federal Reserve, and consequently the surging dollar, had on the economy. 

The S&P 500 closed lower and the Nasdaq 100 fell more than 2 per cent. Meta Platforms Inc. dropped 12 per cent postmarket on a softer-than-expected revenue view and Ford Motor Co. also fell after it warned of a profit shortfall due to inflation. Snap Inc. and Pinterest Inc. also dropped in extended trading. 

Treasuries gained, with the 10-year yield briefly dropping below 4 per cent as investors mulled the Federal Reserve’s path after the Bank of Canada announced a smaller-than-expected rate hike. 

Data that released this week showed a contraction in the services and manufacturing sectors and a drop in sales of new U.S. homes, indicating that Fed tightening is starting to hit the economy. But investors still expect the central bank to raise rates by three-quarters of a percentage point during its next meeting before pondering the end of its tightening regime. 

In any case, it’ll be challenging for the Fed to announce that they’re going to be less hawkish, as they have to manage investors’ expectations along the way, according to Dustin Thackeray, chief investment officer at Crewe Advisors.

“They obviously don’t want to be too dovish and the market is obviously looking for any sort of a sign from the Fed that we’re hitting the break, so to speak, on rate increases,” he said by phone. “If they continue on their too hawkish stance, there is a risk that things kind of get out of hand on that end as well. So they’re definitely walking a very fine line.”

U.S. Secretary of State Antony Blinken’s comments also dampened sentiment on Wednesday after he said he doesn’t see Iran nuclear talks advancing in the short term.

Key events this week:

• Earnings due this week include: Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Volkswagen
• ECB rate decision, Thursday
• U.S. GDP, durable goods orders, initial jobless claims, Thursday
• Bank of Japan policy decision, Friday
• U.S. personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 2.3 per cent
• The Dow Jones Industrial Average was little changed
• The MSCI World index rose 1.6 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.9 per cent
• The euro rose 1.2 per cent to US$1.0081
• The British pound rose 1.3 per cent to US$1.1626
• The Japanese yen rose 1.1 per cent to 146.36 per dollar

Cryptocurrencies

• Bitcoin rose 2.9 per cent to US$20,780.62
• Ether rose 6.1 per cent to US$1,564.26

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.01 per cent
• Germany’s 10-year yield declined six basis points to 2.11 per cent
• Britain’s 10-year yield declined six basis points to 3.58 per cent

Commodities

• West Texas Intermediate crude rose 3.3 per cent to US$88.15 a barrel
• Gold futures rose 0.6 per cent to US$1,668.30 an ounce