US stocks fell as Jerome Powell made it plain that rates are likely to stay high for some time, dispelling the notion that the Federal Reserve will change course and endanger its fight against inflation.
The US Stocks S&P 500 had its worst day since mid-June during afternoon trading in New York, and the US Stocks Nasdaq 100 fell more than 4%. Some traders believe that the fact that major equity indices have fallen below their 100-day moving averages suggests the possibility of further losses. The dollar increased along with a rise in the two-year Treasury yields, which are more responsive to impending policy changes.
US Stocks Loses More Than The Crypto Market Cap
In recent weeks, hawkish Fed talk has become more prevalent as financial conditions have improved following a stock rebound that began with short covering, restored $7 trillion in market value, and strangely was associated with dovish expectations. The worry that restrictive policy will increase the likelihood of a recession next year was another justification offered by traders for the decline on Friday.
The Fed will continue to be aggressive at the expense of growth, according to Cliff Hodge at Cornerstone Wealth, and traders should prepare for higher volatility and more challenging conditions for the stock market. The Fed Chairman maintained that another “unusually significant” boost may be necessary next month, but he refrained from making a commitment, saying that the choice will rely on new data. The Kansas City Fed Chief Esther George noted that the federal funds rate may end up being higher than markets are now pricing for when she highlighted that the central bank is not finished.
The odds of a half-point or three-quarter hike were almost equal in futures contracts referencing the Fed’s policy meeting in September. As traders expect fewer rate cuts in 2023, the amount of further tightening priced in for this year climbed marginally.