Posted on 09/21/2022 1:10:22 PM PDT by Signalman
Stocks fell in volatile trading Wednesday after the Federal Reserve raised rates by three-quarters of a point and forecast more sizable rate hikes in its fight against inflation, actions widely expected by traders.
With the S&P 500 down more than 8% in the past month and 18% for 2022 heading into Wednesday’s Fed actions, stocks were already pricing in an aggressive tightening campaign by the Fed that could push the economy into a recession.
The Dow Jones Industrial Average last traded 294 points lower, or 0.9%, after being up as much as 314 points. The S&P 500 dipped 0.7%, and the Nasdaq Composite traded 0.7% lower.
Stocks were volatile as traders parsed through the rate decision and the latest comments from Powell’s press conference.
The Fed raised rates by the widely expected 75 basis points and said it expects its so-called terminal rate to reach 4.6% to fight persistently high U.S. inflation. That’s the rate at which the central bank will end its tightening regime. The central bank also indicated that it plans to stay aggressive, hiking rates to 4.4% by next year.
“You can only steer the ship towards the storm for so long, but eventually there comes a time when you need to batten down the hatches and with the Fed’s third consecutive 75 basis point rate hike over the past four months, market participants should be looking for cover to weather the upcoming storm,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
Treasury yields popped on the news. The 2-year rate, which hit its highest level since 2007, last traded at around 4.1%. The 10-year rate jumped to about 3.6%.
All major S&P 500 sectors finished the session in negative territory, led to the downside by consumer discretionary and communication services.
Stocks are down 20% of face value. If you factor in the nominal value is down ANOTHER 20% because of inflation then your stock portfolio is 40% lower then 2 years ago. Real estate is next.
It is not all they got.
As predicted - the low, briefly
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Sep 22, 5:01 PM EDT • Disclaimer
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