U.S. stocks decline as traders eye supersized Fed hike

Stocks fell with US equity futures, giving up early gains, as traders braced for another supersized US rate hike amid rising anxiety the Federal Reserve could overtighten and raise the odds of a hard landing.

The Stoxx 600 Index dropped 0.8 per cent, paced by losses on real estate and miners. US equity futures also declined after briefly trading higher, with those on the tech-heavy and rate-sensitive Nasdaq 100 underperforming S&P 500 peers.

The US central bank kicks off its meeting today and is expected to again hike rates by 75 basis points Wednesday, signal rates are heading above 4 per cent and will then pause. The long hold strategy is rooted in the idea the central bank would avoid the disastrous stop-go policy of the 1970s that allowed inflation to get out of hand. Market participants have dialed back expectations of an even larger increase and only two of 96 economists in a Bloomberg survey now predict a full-point move.

“The Federal Reserve is likely tightening policy straight into the teeth of a recession,” Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence, wrote in an email.  “The stock market’s addiction to Fed easing when stocks decline may be what Jerome Powell is aiming to quash by aggressively hiking rates, in addition to inflation.”