Stocks Fall for a Second Day as Rates Jump, with the Fed Set to Tighten Policy Aggressively

Tiger Newspress2022-04-06

Stocks dipped for a second day on Wednesday and rates soared to new heights as investors bet the Federal Reserve is about to aggressively tighten policy to fight inflation, and in turn slow the economy.

The Dow Jones Industrial Average traded 251 points lower, or 0.7%. The S&P 500 slid 0.8%, and the Nasdaq Composite pulled back by 1.3%.

Minutes from the Fed’s most-recent meeting are slated for release Wednesday afternoon. The minutes come from last month’s meeting when the central bank raised rates and indicated six more hikes were coming this year. Investors are bracing for new details about the Fed’s plan to reduce its balance sheet after comments from Fed officials knocked down stocks on Tuesday.

The 10-year Treasury yield jumped above 2.65% on Wednesday, hitting a three-year high and continuing its rapid climb this week. The rate ended Monday at 2.40%.

Fed Governor Lael Brainard in a speech on Tuesday indicated support for higher interest rates and said a “rapid” reduction of the central bank’s balance sheet could begin as soon as May. Following her remarks, the Dow pulled back by about 280 points and the Nasdaq Composite slid 2.3%.

“It is of paramount importance to get inflation down,” Brainard said during a Minneapolis Fed webinar. Brainard has been nominated to be vice chair of the Federal Open Market Committee.

San Francisco Fed President Mary Daly also shared concerns about inflation. “I understand that inflation is as harmful as not having a job,” Daly said.

Tech shares fell again on Wednesday following Tuesday’s losses, as investors rotated out of the group and braced for higher rates to slow the economy. Chipmakers Nvidia and Marvell Technology continued their descent on Wednesday.

Tesla, Microsoft, and Amazon shares were also slated to fall more than 2% on Wednesday and Twitter shed 3% premarket after rallying this week amid news that Elon Musk purchased a large stake in the company. As the Federal Reserve hikes rates investors have begun rotating into stocks with stable profits and shying away from those offering future growth.

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Comments

Bspn
2022-04-07
Bspn
Ok
blitudik
2022-04-07
blitudik
Opportunity?
TheEndIsNear
2022-04-07
TheEndIsNear
So how? 🤷‍♂️
RichyRick
2022-04-07
RichyRick
Good to know
PearlynCSY
2022-04-07
PearlynCSY
Inflation has become one of 2022's biggest economic stories in many countries as a confluence of global events is placing upward pressure on prices. In the US, inflation rate is at its highest in 4 decades, with its CPI reaching 7.9% YOY in Feb. The war between Russia and Ukraine could not have come at a worse time: Energy prices in particular have risen sharply over the past year and the conflict has pushed prices up even higher, with Brent crude hitting $139 last month before stabilising above $100.They are even talking about the return of stagflation, which the world has not seen since the 1970s’ oil shock. I expect the economic and financial challenges to get worse before they get better.
Success88
2022-04-07
Success88
Yeah no choice recession