To The Moon

$DJIA(.DJI)$

· The stock market continued its drop Thursday afternoon with technology stocks leading the way. The fall comes after the Federal Reserve lifted rates and signalled it would remain aggressive in its fight against inflation.

· The Fed remains adamant that it needs to kill high inflation even if it means forcing the economy into recession. Yesterday, more of the world’s central banks joined the Federal Reserve in raising interest rates to curb persistently high inflation.

· Rate hikes in the UK, Switzerland and Norway, along with increases in Asia for the Philippines, Indonesia and Taiwan, look set to damp market sentiment in the region.

· The Dow Jones Industrial Average slipped 108 points, or 0.4%, while the S&P 500 declined 0.9%, and the Nasdaq Composite, which is stacked full of technology companies that are more sensitive to changes in borrowing costs, fell 1.4%.

· The yield on the 10-year US Treasury note, seen as a proxy for global borrowing costs, jumped to 3.7% as the price of the debt instrument fell. The policy-sensitive two-year yield rose to 4.12%.

· "The Fed has succeeded in convincing markets that they will remain aggressive with fighting inflation,” wrote Edward Moya, senior market analyst at Oanda.

· The US market is partly responding to rate hikes from other central banks as well. On Thursday, the Bank of England lifted its key lending rate by 0.5 percentage points to 2.25%. The Swiss National Bank took borrowing costs up 0.75 percentage points to 0.5%. The decision, framed by analysts at ING as “the end of an era”, marked a shift into positive territory by the SNB for the first time since 2015.

· Concerns have intensified in recent months that interest rates will climb around the world to levels that exacerbate an economic downturn as authorities strive to tame rapid price growth.

· But the overarching worry for the stock market right now is earnings. The economic damage from higher rates plus a stronger US Dollar could bring earnings down from current expectations. Forecasts have already dropped across sectors, and more of the same could be on the way. Recently, inflation itself has lowered demand in some businesses and caused soaring costs in others. But it takes time for consumers to spend even less after rates move upwards, so there could be another wave of downward earnings revisions.

· Asian stocks face the prospect of a sixth weekly decline. China stocks ended the session lower amid a broad equities’ downturn in Asia, as the Fed's rising hawkishness sparked a broad selloff in regional equities. The Hang Seng Index closed at its lowest level since late 2011. The benchmark index fell below 18000 during the session, before recovering some lost ground to close 1.6% lower. Tech and financials were among top laggards. Japanese stocks were dragged lower by tech and shipping stocks amid concerns about the global economic outlook. The Nikkei Stock Average fell 0.6%.

@TigerStars