Market report in detail
FED stands firm – markets don’t:US stock futures fell Monday morning after rising interest rates and currency turmoil pushed major averages near their lows for the year. On Friday, stock markets ended a brutal week in which the Dow hit a new yearly low, closing 486 points lower. The broad S&P 500 temporarily broke below its June closing low and ended down 1.7%. The tech-heavy Nasdaq Composite lost 1.8%. Investors reacted to the US Federal Reserve sticking to its rate hike plan to curb inflation. Closing the FOMC meeting, Chair Jerome Powell said the central bank could hike rates as high as 4.6% before withdrawing. The forecast also shows that the Fed plans to remain aggressive this year and raise rates to 4.4% by the end of 2022. The perception of many traders who expected signs of a turnaround by the Fed in Jackson Hole or at the FOMC meeting in September did not materialize. A “hard landing” is becoming the base case for many, and that means more economic pain to come along with a much weaker stock market. Meanwhile, bond yields soared. The 2-year and 10-year Treasury rates hit highs not seen in over a decade. Last Friday, Goldman Sachs also lowered its year-end target for the S&P 500 to 3,600 from 4,300. Under the current circumstances, it does not appear that as if economic data releases or statements by the Fed could persuade markets that a reversal of this aggressive tightening campaign is on the cards for the foreseeable future. Looking ahead, traders await Friday’s release of data on personal consumption spending, the Fed’s preferred indicator of inflation. Durable goods and consumer sentiment figures will also be released this week.
British pound has its back against the wall: The pound’s plunge came after the UK’s new government announced last week that it would introduce tax cuts and investment stimulus to boost growth. Critics say these economic measures will disproportionately benefit the wealthy and could result in the UK taking on large amounts of debt at a time of rising interest rates.
