After a brief weakness bout, the stock market ended the day sharply higher after The Federal Reserve raised interest rates by a quarter point He indicated that six others could follow.
It was a fierce day for
Dow Jones Industrial AverageAnd the
Which gained more than 500 pips, gave back all those gains before closing up 519 pips by 1.6%. The
It ended with 2.2%, while
The market is grappling with the potential impact of what seemed, on the surface at least, to be a fairly straightforward meeting. The Fed said it would raise the federal funds rate by a quarter of a percentage point, which markets had expected. The Fed also estimates that the rate will reach 2.75% by the end of 2023, which will include seven quarter-point increases this year and more next year. That wasn’t far from the consensus either. On its balance sheet, the Fed said it would start reducing its bond holdings “at the next meeting.” Through it all, Chairman Jerome Powell has made clear his main goal is to fight inflation, which hit a 40-year high last month.
Not only did the Fed’s decision push stocks lower, it moved the bond market. The two-year Treasury yield rose to 1.92% from 1.88% just before the announcement, while the 10-year yield fell to 2.16% from 2.18% minutes before the announcement. When the gap between Treasury yields narrows, that can indicate concerns about the economy.
Markets are now realizing that the Fed is almost solely focused on pushing inflation down, which likely means slowing economic demand as well. “The Fed is not concerned about economic growth right now,” said Tom Isay, founder of Sevens Report Research. It is not about Ukraine. They are very concerned about inflation and they are very focused on raising prices.”
With that, the stock market continued a very strong week. Reports have emerged of diplomatic progress in talks between Russia and Ukraine – they may be making progress on a 15-point peace deal that includes a ceasefire and a Russian withdrawal on the condition that Kyiv accepts restrictions on its military, According to the Financial Times. Also, according to multiple reports, Ukrainian President Volodymyr Zelensky said that the talks between the two sides were looking good. “More realistic.”
As a result, the price of West Texas Intermediate crude is down 1.9% near $94 a barrel – down 28% from a multi-year peak of $130 earlier this month. The concern is that the ongoing war will cause Western countries to stop buying Russian oil – and the US has already imposed Ban on importsReducing the global supply. The rise in the price of oil adds to Already cumbersome inflation Consumers had to deal with it.
Mark Heffel, chief investment officer for global wealth management at UBS, said this week’s oil market slump “partly reflects fears of further supply disruptions based on negotiations between Russia and Ukraine.”
However, one silver lining for the markets ahead is that stocks have already been defeated — the S&P 500 is down nearly 9% from its all-time high — and investors have plenty of cash. According to a fund manager survey conducted by Bank of America, funds hold 5.9% of their cash portfolios in cash, the highest level since April 2020 when the pandemic began. Hedge funds have sold stocks in droves, as the fund’s average long exposure – or bets that the shares will rise – as a percentage of total portfolios are also the lowest since April 2020. This means investors may feel the need to return to the market, pushing stocks into the above.
This is often recommended by strategists to investors after big dips. “We continue to recommend putting new money to work when the market is down 10% or more,” wrote Christopher Harvey, Wells Fargo’s head of equity strategy.
Nowhere has buying demand been more pronounced as in Asia, where traders saw an exciting day after China’s top administrative authority said it would act to… Chinese stock market stability promoting economic growth, The state-run Xinhua News Agency reported.
who – which spur great careerwith shares in some of China’s largest companies up 20% as Hang Seng posted its biggest daily gain since 2008. But the main index of Chinese stocks is still deep in correction territory, down nearly 14% this year and some 40% below the high Closing his record in 2018.
Shares in popular Chinese stocks listed in the US rose, with
(Stock ticker: BABA) up 37% in the US
(JD) jumped 39% with
(NTES) climbed 26%.
Yum China Holdings
(YUMC) gained 9.5%.
(WYNN), which sees 40% of its sales coming from China according to FactSet, saw its stock increase 8.1%.
Las Vegas Sands
(LVS), which sees the majority of its sales from China, saw its shares rise 12%.
SBUX stock rose 5.2%. The company sees 12% of sales come from China, and has been upgraded to Overweight from Neutral at JPMorgan. Also, the current CEO Kevin Johnson is set to retire and the interim CEO will be former President Howard Schultz.
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