Wall Street Slumps Amid Powell’s Hawkish Comments

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According to a Reuters report, the United States stock indexes plummeted again on Thursday after a broad recovery in the previous trading session.

Powell’s Hawkish Remarks Triggers Stock Slip

The U.S Federal Reserve chairman, Jerome Powell, recently hinted at another possible interest rate hike for September. Powell’s statement led to the stock market spiraling down again after a brief rise.

At a conference, Powell noted that his agency is “strongly committed” to tackling inflation. However, the belief is that the Fed can achieve it without the high costs of previous inflation measures. 

Meanwhile, Randy Frederick of Charles Schwab revealed that Powell had maintained his “hawkish tone,” and the market was still in shock. As a result, there is a massive selloff due to the Fed chairs’ statement.

Furthermore, data revealed that Wall Street’s indexes surged to their highest in close to a month on Wednesday. In the same period, the bond yield reversed following a recent spike sparked by expectations of more interest rates.

However, the S&P 500 is still 8%, far from its August high. Additionally, it has dropped 17% from the start of the year. Meanwhile, aggressive remarks from officials of the Fed and the recent data showing the U.S economy is robust enough have made market players take action. 

As a result, the money market has reacted by betting on the Fed hiking interest rates by 75 basis points in September. Moreover, the Fed’s future funds indicate that traders are already banking on the possibility of a raise.

Hike in Policy Rates

Most top companies have up their policy rate Forecast in response to the Fed remarks. For example, Goldman Sachs also pushed its rates to 75 basis points from the previous 50.

Moreover, data shows that there has been a decrease in the number of Americans filing unemployment benefits. The number fell to its three-month low last week, showing how the labor market is regaining its strength amid interest rates hike.

The appetite for risk assets has been low on a global scale in 2022. This concerns the fear of a recession triggered by aggressive policies from central banks about interest rate rises. In addition, the slow economic growth in China and Europe has contributed to the low demand for risky assets.

In another development, the European Central Bank (ECB) also raised interest rates by 75 basis points on Thursday. Experts believe that this will signal any further hike by the ECB. 

The stock market has generally been a miss-and-grab situation. The video game retailer GameStop Corp (NYSE: GME) spiked 2.7% after the company reported a slight quarterly loss in September. 

Similarly, American Eagle Outfitters Inc. (NYSE: AEO) shed 9.6% after the firm announced it had missed its Q2 profits estimates. The company also revealed that it had halted its quarterly dividends pending when it has enough liquidity against inflation.

In contrast, the S&P index has three 52-weeks highs alongside seven lows. On the other hand, Nasdaq data shows 20 highs and 90 lows.

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