Fed pivot; fat hope
The US stocks have been rallying in the past few days leading up to the Fed's meeting. There was hope that the Fed may slow the pace of rate hikes in the future, aka the pivot.
The latest hike was another 0.75%, which was totally expected. But it was Powell's hawkish comments that disappointed the markets.
Here are some excerpts,
"We have some ground to cover with interest rates... there's no sense that inflation is coming down."
"The ultimate level of interest rates will be higher than previously expected."
"Very premature to think about pausing."
Ouch, hopes were dashed and markets immediately reacted.
US stocks were up initially but lost all the gains and some more, with S&P 500 closing down by 2.5% while Nasdaq Composite was down 3.4%.
US Dollar strengthened further with the US Dollar Index up 0.56%.
US bond yields rose - 2-year yield at 4.599% and 10-year yield at 4.084%. This indicates the yield curve remains inverted and recession is looming.
The market expects interest rates to stay above 5% for a good part of 2023, which adds more brakes to the slowing economy.
Between inflation and recession, the Fed thinks the latter is the lesser of the two evils.
Big tech stocks fell again
Microsoft -3.5%
Apple -3.7%
Alphabet -3.8%
Amazon -4.8%
Meta -4.9%
All major sectors were down
Well, investors just have to wait longer for the bull to come back.