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Tech Stocks Stumble as Powell Indicates Further Rate Hikes

The stock market closed lower on Wednesday as tech stocks faced increased pressure, following Federal Reserve Chairman Jerome Powell's indication of potential rate hikes later this year.

Jerome Powell
Jerome Powell

Powell Proposes Rate Hikes Amid Rising Inflation

Jerome Powell, Chairman of the Federal Reserve, hinted during his testimony before the House Financial Services Committee that there might be two more rate hikes this year. Powell suggested these hikes would be a "pretty good guess" if inflation continues to exceed the Fed's 2% target. This assertion set the stage for his subsequent testimony scheduled for Thursday before the Senate Banking Committee.

His stance was in stark contrast to other Fed members like Chicago Fed President Austan Goolsbee and Atlantic Federal Reserve President Raphael Bostic, who advocated for a more cautious approach toward rate hikes.

Tech Giants Feel the Heat, Tesla Downgraded

The potential for rate hikes put a significant damper on tech stocks, with Google and Microsoft feeling the most pressure. Google complained to Microsoft with the Federal Trade Commission, accusing the latter of anti-competitive practices in the cloud-computing market.

Meanwhile, Amazon faced legal troubles as the FTC sued the online retail giant for allegedly misleading customers into signing up for its Prime services. Tesla also saw a stock drop of over 5% after Barclays downgraded the company's rating from Buy to Hold, citing potential further price cuts that could impact its margins and earnings.

Energy Sector Surges, FedEx Falls Short

In contrast to tech, the energy sector experienced an upswing as oil prices rebounded. Among the leading gainers were Baker Hughes Co, APA Corporation, and Copper Futures. FedEx Corporation, however, disappointed investors with its fourth-quarter revenue and guidance falling short of Wall Street estimates, causing its stock to dip nearly 3%.

Crypto Stocks Rally Amidst Bitcoin ETF Hopes

Crypto-related stocks saw an uplift after Bitcoin briefly surged to over $30,000, a more than one-year high. This increase was fuelled by growing anticipation of a spot bitcoin exchange-traded fund (ETF). Notable firms like Wisdom Tree, BlackRock, and Invesco have made new filings for a spot bitcoin ETF, raising expectations of renewed demand from institutional investors.