Stocks fall sharply on Wall Street after the Fed hints that it will continue to raise interest rates
Stocks fell on Wall Street on Wednesday afternoon after an official at the Booking Federal say the central bank needs to keep raising rates interest rates to control the inflation. The remarks came after new data emerged showing consumers reined in retail spending last month.
The index S&P 500 lost 1.6%, the Dow Jones fell 1.8% and the nasdaq Composite it was down 1.2 percent.
The negotiation has been unstable so far this week, after two solid weekly gains.
Technological stocks were among those that weighed the most in the market. Microsoft it fell 1.2% after becoming the latest tech company to announce layoffs. The software giant is cutting 10,000 workers, almost 5% of its workforce.
The treasury yields they fell sharply after the government reported that Americans cut spending more than expected last month, the second decline in a row. The Government also published data on inflation more encouraging. Wholesale prices rose 6.2% in December from a year earlier, marking the sixth consecutive slowdown in the measure of prices before they are passed on to consumers.
The 10-year Treasury yield, which influences interest rates on mortgages and other loans, fell to 3.39% from 3.55% on Tuesday.
The two-year Treasury yield, which follows expectations of further action by the Federal Reserve, fell to 4.09% from 4.16% prior to the release of the latest economic data. Late on Tuesday it reached 4.21 percent.
“It seems that something is moving inflation and retail sales in the right direction, which is to say, softer”said Tom Martin, a portfolio manager at Globalt Investments. “The question is what it really means.”
Wall Street has been hoping that easing inflation and slowing economic growth could influence the Federal Reserve’s interest rate stance. The central bank aggressively raised rates throughout 2022 in an effort to cool hot inflationbut that has hurt stock and bond prices, and risks going too far and triggering a recession.
Although there are increasing signs that high inflation is finally subsiding, there is still a need new uploads of types, according Loretta MesterPresident of the Federal Reserve Bank of Cleveland,
“I still see the greatest risk in too little tightening,” Mester said in an interview Tuesday with the news agency. PA.
Mester insisted on his conviction that the official interest rate of the Federal Reserve should rise “a little” above the range of the 5% to 5.25% that policy makers have collectively projected by the end of this year.
The central bank has raised its overnight interest rate to a range between 4.25% and 4.50%, from about zero a year ago. The Fed will announce its next decision on interest rates on February 1. Investors expect a rise of just 0.25 percentage points next month, less than December’s half-point rise and the previous four rises of 0.75 percentage points.
The overall economic picture is not yet clear enough to tell if the Fed’s fight against inflation is working. well enough to avoid a recession. Several major banks have forecast at least a mild recession sometime in 2023.
Investors are also reviewing the latest batch of corporate earnings to learn more about how inflation and consumer spending are affecting profits and revenue. PNC Financial Services Group fell 5.4% after posting weak results.
European and Asian markets were mostly up. Japan’s Nikkei 225 rose 2.5% after the Bank of Japan kept its loose monetary policy unchanged, allaying speculation that it would cave to pressure and join other central banks in raising interest rates to fight inflation.
(With information from AP)