Shares of energy companies tumbled as traders rotated out of sectors sensitive to changes in Federal Reserve policy and inflation trends.
The energy sector has been on a tear in recent months, as investors brace for a prolonged period of inflation stoked by a sudden reawakening of the global economy. The Fed's warning that it was monitoring inflation weighed on the sector that has become a proxy for inflation expectations.
"The Fed solidified a more hawkish shift in tone and laid the groundwork for increased policy flexibility over coming months," said economists at brokerage Morgan Stanley in an analysis of the central bank's Wednesday statement produced for clients. "Forecast changes indicate ... that the Fed may have previously erred on the side of overestimating how long it would need to keep its foot on the gas pedal ... but now the Committee sees an economy that may need less policy support in order to achieve the same outcomes."
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(END) Dow Jones Newswires