* U.S. stocks end mixed after being up roughly 2%
* Oil hits highest level since 2014
* Dollar hits three-week high
By Pete Schroeder
WASHINGTON, Jan 26 (Reuters) - U.S. stocks retreated
Wednesday, erasing strong gains, after the Federal Reserve
signaled an interest rate hike could be coming soon, while
supply concerns stemming from tension between Russia and Ukraine
saw oil prices touch highs not seen since 2014.
Wall Street ended the day in mixed territory after spending
most of the day up roughly 2%. Stocks shed those gains following
an afternoon policy update from the Fed and press conference by
Fed Chairman Jerome Powell, which suggested the Fed would push
forward with interest rate hikes.
The Dow Jones Industrial Average closed down 0.38%,
while the S&P 500 fell 0.15% and the Nasdaq Composite
gained just 0.02%.
The MSCI world equity index, which tracks
shares in 45 nations, was largely flat.
In its latest policy update, the Fed signaled it is likely
to raise U.S. interest rates in March and reaffirmed plans to
end its bond purchases that month before launching a significant
reduction in its asset holdings.
In the follow-up press conference, Powell warned that
inflation remains above the Fed's long-run goal and supply chain
issues may be more persistent than previously thought. Stocks
turned negative during his comments, as some investors bet the
Fed would prioritize fighting inflation over ensuring robust
economic growth.
"The market took notice of the stress the Fed Chair put on
the inflation side of the equation combined with his stressing
of the tight labor market. This implies that the Fed could be
comfortable with some reduction in the pace of overall economic
growth," said Russell Price, chief economist at Ameriprise
Financial Services.
The Fed also said its policy-setting members had agreed on a
set of principles for shrinking its balance sheet, set to start
sometime after interest hikes begin. The Fed's balance sheet
roughly doubled in size during the pandemic to nearly $9
trillion, as it snapped up bonds to help keep longer-term
interest rates down to support the economy.
U.S. Treasury yields rose as the Fed issued its update. The
U.S. Treasury 2-year yields hit their highest level since
February 2020. The benchmark U.S. 10-year yield
climbed to 1.8709% shortly after the Fed statement.
The dollar hit a three-week high after the Fed news. The
dollar index, which tracks the greenback versus a basket
of six currencies, rose 0.58%.
Spot gold prices were down 1.64% to $1,817.31 an
ounce.
OIL TOUCHES SEVEN-YEAR HIGH
Growing tension as Russian troops massed on Ukraine's border
continued to push oil prices higher amid concerns of supply
disruption, with oil clearing $90 a barrel for the first time
since 2014.
U.S. President Joe Biden said on Tuesday he would consider
personal sanctions on President Vladimir Putin if Russia invaded
Ukraine, as Western leaders stepped up military preparations and
made plans to shield Europe from a possible energy supply shock.
Brent crude ended up 1.55% to $89.57 a barrel. U.S.
crude ended up 1.65% at $87.01 per barrel.
(Additional reporting by Sinead Carew; Editing by Marguerita
Choy, Alistair Bell and Chizu Nomiyama)