December 5, 2022

Shares fall again as investors weigh in on Federal Reserve decision and inflation

Shares began to fall in early trading on Tuesday, pushing financial markets further into a “correction” – down 10% from their most recent highs – following the stock’s return on Monday. Gathered late in the day.

The Dow Jones Industrial Average fell 667 points, or 1.9%, shortly after the market opened, while the broader S&P 500 fell 2.4%. Technology-heavy Nasdaq lost 2.7% in early trade on Tuesday.

Prior to Tuesday’s decline, the S&P 500 had already lost 8% of its value this year, and it was not ashamed to make a correction. But the tech-heavy Nasdaq composite has fallen more than 12% this year and about 14% since its November peak, placing squarely in that category.

Markets rallied on Monday, with the Dow falling over 1,100 points and closing before closing in positive territory, while the S&P 500 and Nasdaq were hit hard by heavy losses from the previous session.

Market volatility erupted this month as investors weighed in on how seriously the Federal Reserve, which is holding a policy meeting this week, could raise interest rates to combat rising inflation. Consumers In 2021, prices rose 7%, The largest increase in almost 40 years.

Historically, stocks fall sharply when core inflation stands at 5.5%, excluding volatile food and energy prices, according to UBS analysts. By 2021, core inflation, as measured by the Consumer Price Index, will be 5.5% higher than the previous year.

The rise in Omigron variant cases could further boost inflation and disrupt supply chain, economic growth and reduce corporate earnings, Goldman Sachs analysts warned in a recent research note, and wages could rise faster than expected.


Stock markets close after a wild trading day

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As a result, analysts say, the central bank may “see a hot inflation dashboard at its next few meetings.” This increases the chances that “the central bank will take some austerity measures at every meeting until the inflation picture changes” and that interest rates could more than quadruple in 2022.

Many Wall Street analysts and policymakers expect the central bank to signal that it plans to raise rates in March when it releases its policy statement on Wednesday.

Ukraine Tensions

Investors are watching tensions between Russia and the West, Moscow plans to occupy Ukraine, NATO outlines Possible troops and ship deployments.

The Pentagon has ordered 8,500 potential troops to come to Europe as part of NATO’s “response force” to military action in Ukraine. President Joe Biden held consultations with key European leaders, underlining America’s solidarity with its allies there.


Efforts are underway to prevent an invasion, but Russ …

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With monetary policy and geopolitical risks, markets are focusing on corporate earnings as the reporting season begins. Shares of General Electric fell 4.7% in pre-market trading after reporting a $ 3.8 billion loss in the fourth quarter. As the Omigron variant affects businesses and consumers, investors are watching for signs of declining demand.

“In economic news, according to IHS Markit data, business activity in the United States fell to an 18-month low this month,” said Craig W. Johnson of Piper Chandler in a research note.

– With the Associated Press report.