The market has grown increasingly nervous that the Fed will raise rates faster and higher than expected to get inflation under control. The stock market sell-off following https://www.day-trading.info/buying-stocks-and-mutual-funds-without-a-broker/ Tuesday’s inflation report is turning into a rout. Wall Street’s big fear is that higher rates will eventually lead to an economic slowdown or even a recession.
- For now at least, analysts are anticipating S&P 500 earnings growth will continue to accelerate in the first half of 2024.
- That could give the Fed license to hike interest rates even faster and higher than forecast.
- One strategist suggested that there could be more market pain ahead.
- The event comes after Advanced Micro Devices (AMD) held a similar launch event last week, helping move its share price up by more than 7%.
That was in-line with economists’ estimates but still above the FOMC’s 2% long-term target. The bond market is pricing in just a 3.0% chance the FOMC will cut rates at its March meeting. However, the market is pricing in a 66.1% chance the FOMC will cut interest rates by at least 25 basis points by June.
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David Bahnsen, chief investment officer at The Bahnsen Group, says the recent enthusiasm for tech stocks reminds him of the dot com bubble and investors should tread carefully. Value stocks have historically outperformed growth stocks when interest rates are high, but that trend has reversed since the beginning of 2020. Wall Street analysts project about 8% upside for the S&P 500 in the next 12 months. usgfx forex broker, usgfx review, usgfx information Analysts see 17.8% upside for the energy sector in the next year, more than any other market sector. “The Fed minutes are showing that we’re still likely a few meetings away from a rate cut,” Swanke says. The market is worried that hotter-than-expected inflation will prompt the Federal Reserve to raise interest rates more aggressively, inflicting serious damage to the US economy in the process.
Nowhere to hide as stocks swoon across the board
Already, the Fed has raised rates by a historic half point and then twice by three quarters of a point. The Dow plummeted nearly 900 points in late morning trading…and all 30 Dow components were in the red. Nine Dow stocks, including tech giants Intel (INTC), Microsoft (MSFT), Apple (AAPL) and Salesforce (CRM), were down more than 4% each. The tech sector was hit particularly hard Tuesday, as investors ratcheted up their bets for a historically large interest rate hike by the Federal Reserve next week. For the second straight week, a chipmaker will host an event to debut new technology and tout the AI power of its products. On Thursday, it’s Intel’s “AI Everywhere” launch, where the company will launch its fifth-generation Xeon processors for data centers and Core Ultra processors for laptops.
Stocks tumble in worst day since June 2020
Investors are incredibly anxious about inflation, which refuses to go away. The Dow plummeted more than 1,050 points, or 3.3%, in late afternoon trading Tuesday. The S&P 500 and Nasdaq fared even worse, tumbling 3.6% and 4.5% respectively. The most recent readings have been promising, as the Personal Consumption Expenditures (PCE)—the Federal Reserve’s preferred inflation gauge—showed inflation falling to 3% year-over-year in November. Last month’s CPI also looked better, with inflation dropping to 3.2% from 3.7%. U.S. wages were up 4.5% in January compared to a year ago, and the unemployment rate remained historically low at 3.7%.
The CNN Business Fear & Greed Index, which measures seven gauges of market sentiment, is once again showing signs of Fear on Tuesday as the broader market plunged. The VIX, a volatility index that is one of the seven components of the Fear & Greed Index, shot up nearly 8%. Stocks had been on a four-day winning streak prior to Tuesday’s plunge. One strategist suggested that there could be more market pain ahead. Traders may have made the mistake of assuming that inflation would soon no longer be a major economic problem. The forecast is for a year-over-year increase of 8.8% for overall producer prices and 7.1% over the past 12 months for core PPI, which excludes food and energy costs.
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For value investors, the market sector that currently has the lowest forward price to earnings ratio is the energy sector at 11.8. Market watchers will have their focus trained on Wednesday this week, when the FOMC ends its two-day meeting with a decision on the federal funds interest rate that currently stands at 5.25% to 5.5%. Investors strongly believe that the Fed will keep rates there, with the CME FedWatch tool indicating a 98.4% chance that markets have priced in another pause at the current rate, with another 1.6% chance of a 25-basis-point hike. The 2024 stock market rally has picked up steam as investors consider whether the latest batch of economic data will force the Federal Reserve to delay its upcoming—and long-awaited—interest rate cuts.
Agriculture company Corteva (CTVA) was the S&P 500 leader, gaining 2% following news of a stock buyback. Fertilizer stocks CF Industries (CF) and Mosaic (MOS) and chemicals company Albemarle (ALB) were higher too. It was a broad-based slide, with all eleven sectors of the market heading lower. Those three groups stand to get hit the hardest if the https://www.forexbox.info/instaforex-overview/ Federal Reserve raises interest rates even more aggressively to try and get inflation under control. The Dow was down 1,300 points, or 4%, with minutes to go before the closing bell mercifully rings on Wall Street. But investors have another inflation report to (fear? dread? seems unlikely that anyone is looking forward to it) on Wednesday.
The event comes after Advanced Micro Devices (AMD) held a similar launch event last week, helping move its share price up by more than 7%. The consumer price index, or CPI, gained 3.1% year-over year in January. That was down from peak inflation levels of 9.1% in June 2022 but above economists’ estimates of a 2.9% gain.
The publication of the rates could also help guide investor action in the future, as its “dot plot” serves to indicate where Fed members think the interest rate should be set at upcoming meetings. There’s also a staff report on the U.S. economic outlook that can show what assessments Federal Reserve officials are considering. The Labor Department reported the U.S. economy added 353,000 jobs in January, far exceeding economist estimates of 185,000 new jobs. December and January represent the first time the U.S. has reported back-to-back months adding more than 300,000 jobs since June and July of 2022. Core PCE inflation, which excludes volatile food and energy prices and is the Fed’s preferred inflation measure, was up 2.8% in January.
In addition to CPI inflation coming in above expectations, the personal consumption expenditures price index, or PCE, was up 2.4% year-over-year in January. The situation on Wall Street was ugly midmorning Tuesday, as investors grew increasingly nervous about the prospect of even higher rate hikes that could last for a longer period of time. The S&P 500 fell 3% and the Nasdaq was down 3.9%, wiping out last week’s gains. Wall Street’s mood has largely tracked the rapidly changing expectations regarding inflation and rate hikes. Just a month ago, before Fed chair Jerome Powell gave a speech that suggested more big rate increases were coming, the Fear & Greed Index was indicating levels of Greed, a sign of complacency.
In the Fed’s January meeting minutes, officials noted they will not be comfortable cutting interest rates until they have “greater confidence” inflation is still declining. In addition, FOMC members highlighted the “risks of moving too quickly” on rate cuts. The US Consumer Price Index Tuesday showed prices in August rose a bit. Although annual inflation fell compared to July, it didn’t fall as much as economists expected. That could give the Fed license to hike interest rates even faster and higher than forecast. The S&P 500 was down more than 3% and just four stocks in the blue chip index were in positive territory.