The market was “naughty” on Wednesday. Fear of a recession and the possibility that the US central bank may have to raise the key interest rate and keep it high swayed investors for a longer period.
Major US indices continued their decline on Wednesday. This is how the major indices closed at 22:00 Norwegian time:
- The S&P 500 fell 0.2 percent
- The Dow finished flat
- The Nasdaq Composite Index fell 0.5 percent
According to Marketwatch.com, the S&P 500 is in its longest decline since October 12 of this year. Health sector, consumer durables (consumer goods) f The real estate sector was the only sector that rose on the broad S&P index, According to the site.
Ryan Detrick, a market analyst with The Carson Group, told CNBC that the market will continue in this direction until investors get more clarity from the Fed. He added that the market is moving in all directions, catching its breath after the October lows.
The economy is stronger than expected
Strong economic numbers recently have caused investors to fear a recession. This week’s ISM report, which ended stronger than expected, raised concerns that the US central bank (Fed) will have to raise interest rates more than expected to bring down inflation.
The stock market rose during the month of November on several signs that the Federal Reserve was on its way to winning the battle against inflation. This helped give hope that interest rate increases will slow somewhat. On the other hand, in December, the US economy proved to be stronger than expected, and for the stock market, it got off to an uncomfortable start.
The US economy tends to outpace expectations, which could exacerbate inflation and force Federal Reserve officials to raise interest rates higher than previously expected – and keep them there for longer.
Higher interest rates have a negative impact on stock markets – people don’t have to worry about it, companies get more expensive financing, and it becomes more attractive to have money on the books compared to stocks.
Waiting for the final interest rate of the year to be determined
There is one week left until Central Bank Governor Jerome Powell and the Federal Reserve make their last interest rate announcement for the year on December 14th.
There, the central bank is expected to cut the rate slightly, after four consecutive increases of 0.75 percentage points, and there The latest increase came at the beginning of November. Indeed, Powell stated last week that the time for “rate-setting moderation” may be imminent.
On Thursday of last week, figures for personal consumption expenditures, the Fed’s preferred measure of inflation, showed just that US inflation in October was 6 per cent. But the day before the Fed’s next interest rate decision, another US inflation number will be released.
Prior to the Fed’s latest interest rate announcement, the key rate ranged between 3.75 and 4 percent.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For additional terms look here.
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