Time.news – Fears of a more aggressive Fed tightening than expected have sunk Wall Street.
After a swing session, the US indices turned negative, dragged down by the words of St. Louis Federal Reserve Chairman James Bullard, who opened at a half-point rate hike in March, fueling concerns that the US central bank will act more decisively to tackle inflation, which jumped to a 40-year high in January.
The Dow Jones lost 1.47% to 35,241.69 points, the Nasadq fell 2.10% to 14,185.60 points and the S&P 500 left 1.84% at 4,502.85 points.
Markets continue to wonder how many interest rate hikes will be in 2022 and uncertainty reigns among investors.
The Fed’s number one, Jerome Powell, did not clarify in the last post-FOMC press conference what the amount of the individual squeezes will be, whether by 25 basis points as per tradition or by half a percentage point.
And the words of the super hawk Bullard made the US market tremble, reinforcing expectations of a more pronounced squeeze than expected.
Bullard, who has been a voting member of the FOMC this year, said inflation figures made him “Dramatically” more cautious, and said he was in favor of an interest rate hike of 50 basis points in March – it would be the first since 2000 – so as to reach an increase of a full percentage point in the next three meetings of the executive committee on monetary policy, that is by July.
After his words, rate futures were pricing in an increase in the target range to 1% -1.25% by the end of June, with some investors ready to bet on an even stronger upside path.
Consumer prices in the United States rose to + 7.5% yoy last month from + 7% in December, spiking to their highest since 1982.
The figure exceeded the expectations of analysts who bet on a + 7.3%. On a monthly basis, inflation remained stable at + 0.6% as in December and against an expected + 0.5%.
The surge in prices is the result of a combination of factors related to the virus, including supply chain problems, shortages of components and a shortage of manpower. The overheating of inflation has reduced household purchasing power and eroded the popularity of President Joe Biden.
This is despite the economy growing at its strongest rate for 37 years in 2021 and the job market is rapidly churning out jobs.
In detail, in one year, energy prices increased by 27% and food prices by 7%.
Inflation will slow “substantially” by the end of the year, Biden said. The US president recognized the “real pressure” on American families but wanted to send a reassuring message: there are “also signs that we will overcome this challenge”.
After the inflation data, government bonds also came under pressure: the 10-year Treasury yield jumped to 2%, its highest level since August 2019.
On the lists of stocks such as Tesla and Microsoft they lost almost 3% at the end. Apple left 2.3% on the ground, Alphabet over 2% and Amazon 1.3%.
Oil prices also suffered setbacks. Despite forecasts for a stronger increase in energy demand, the WTI, after exceeding $ 91, turned negative on fears about the Fed’s moves, and then ended trading at $ 89.88 a barrel, up. 0.3%.