How big will the interest rate step be ?: Fed doubts – Dow drops 1000 points

How big will the rate hike be?
Fed Doubt – The Dow drops 1000 points

The chairman of the board of the US Federal Reserve Powell has expressly assured that the next increase in interest rates will not be higher than recently. But there are doubts on the market. The indices drop sharply.

Investors’ fears of an ever-increasing rate hike by the US Federal Reserve resumed growth in US equity markets and brought Wall Street to a halt. of the Dow Jones Index loses more than 1000 points or 3.6 percent to 32,828 points. The larger one S&P 500 it drops by 4.1 per cent to 4121 points. The index of technological exchange Nasdaq it fell as much as 5.3% to 12,272 points and is heading towards its blackest trading day since June 2020.

S&P 500
S&P 500 4,126.29

The day before, exchanges had gained more than three percent after the central bank raised interest rates by 50 basis points as expected. Fed Chairman Jerome Powell specifically ruled out a 75 basis point rate hike at an upcoming meeting. Nonetheless, investor fears of aggressive monetary tightening in the face of high inflation quickly flared up again. The CBOE Volatility Index, also known as the Wall Street fear indicator, rose to 31.73 points.

“I would say the markets are not accepting the Fed’s dovish stance,” said Callie Cox, a US investment analyst at broker eToro. Some Fed members have already insisted that interest rates must rise more quickly and immediately, Cox said. “So it makes sense for investors to go back to this place of fear that the Fed may do much more than they imagined to use monetary policy to fight inflation.” In futures markets, bets on a 75 basis point rate hike increased during the June Fed meeting.

This view gave the US dollar a boost: the dollar index rose 1.3 percent to 103.88 points. The euro has slipped below the $ 1.05 mark and is approaching the five-year low of $ 1.0470 reached in late April. Investors are puzzled as to when the European Central Bank could follow the Fed’s lead and even initiate the turnaround on interest rates.

In any case, the Bank of England raised interest rates by a quarter of a point to 1.0 percent. However, the decision was not unanimous: three currency watchdogs had asked in vain for an even larger pass to 1.25 percent. But there were fewer supporters than market participants hoped, said Naeem Aslam, chief market analyst at brokerage firm AvaTrade. As a result, the pound came under pressure, falling more than 2% to $ 1.2331.

Investors also had to work out a flood of corporate balance sheets. A disappointing vision broke Etsy the biggest drop in prices in nine months. Shares in the online craft market fell 16.8%. Also Ebay fell under the wheels after a worse-than-expected forecast by the online retailer and fell by 10.8%. The online furniture retailer Wayfair shocked investors with an unexpectedly large loss and the departure of its chief financial officer. Stocks plummeted by more than 21%.

A quarterly result above market expectations and the prospect of rising profits led the lithium producer Albemarle on the other hand, a good trading day. Shares of the global industry heavyweights were up 4.5%.

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