5/31/2023 0 Comments Pins stock forecast![]() ![]() The challenge for the market has been that the economy has actually been too strong, despite all the rate increases the Fed has thrown at it. The Fed's fear is that too-strong gains could push prices higher. ![]() government's monthly jobs report, due Friday, will provide an update on wages. The two-year Treasury yield, which moves more on expectations for the Fed, shot up to 5.01% from 4.87% and is at its highest level since 2007. It helps set rates for mortgages and other important loans. ![]() That’s been most clear in the bond market, where the yield on the 10-year Treasury topped 4% last week and hit its highest level since November. It also upped its forecast for how high the Fed will ultimately take rates before pausing. Wall Street has largely abandoned hopes that percolated early this year for a possible cut to interest rates later in 2023. ”I think it’s going to continue to wash out some of the excesses in the market." “This is the market coming back to realistic expectations,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.”Īfter sitting at virtually unchanged levels just before Powell's testimony, stocks fell immediately afterward. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said. That would be a sharp turnaround after it had just slowed its pace of increases to 0.25 percentage points last month from earlier hikes of 0.50 and 0.75 points. Powell has confirmed some of those fears, saying the data mean “the ultimate level of interest rates is likely to be higher than previously anticipated.” He also said in his testimony to a Senate committee that the Fed is ready to increase the pace of its hikes again if needed. They also raise the risk of a recession later on. Higher rates can drag down inflation because they slow the economy, but they hurt prices for stocks and other investments. That raised fears that inflation is staying stickier than feared and that the Fed will have to raise rates higher than earlier thought. So did a suite of other data on the economy. After seeming to be on a steady decline since last summer, reports on inflation last month came in surprisingly hot. Inflation and what the Fed is doing about it have been at the center of Wall Street's sharp swings this year. The Dow Jones Industrial Average lost 1.7% to 32,856.46, and the Nasdaq sank 1.3% to 11,530.33. The S&P 500 dropped 1.5% for one of its worst days of the year so far, closing at 3,986.37. Wall Street declined as angst over the Fed raised worries about a possible recession down the line. Congress again later in the day, traders will watch to see if he reinforces the hawkish rhetoric or tones it down, given the market reaction. He noted recent macro data, while possibly related to seasonal adjustments, suggest the Committee might have to raise rates higher than expected,” said Anderson Alves at ActivTrades.Ī Fed meeting later this month is expected to result in another rate hike. “Asian shares were under pressure on Wednesday as global equities sold off after hawkish comments from Fed Chair Powell. Wall Street shuddered Tuesday after Fed Chairman Jerome Powell told lawmakers that the central bank would keep interest rates higher if need be to fight inflation. Hong Kong's Hang Seng tumbled 2.6% to 20,005.12, while the Shanghai Composite shed 0.6% to 3,266.65. South Korea's Kospi dropped 1.3% to 2,430.93.Ĭhinese shares sank after officials in Beijing announced plans for a regulatory shakeup. Japan's benchmark Nikkei 225 edged up 0.5% to finish at 28,444.19. TOKYO – Asian shares were mostly lower Wednesday as investors fretted that the Federal Reserve might raise interest rates faster if pressure stays high on inflation.
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