Posted on 05/05/2022 10:11:31 AM PDT by lasereye
U.S. stocks plunged Thursday, giving back nearly all the gains from the biggest single-day rally for the S&P 500 in two years, as Treasury yields jumped and investors peeled away from a Fed-induced rally and looked to the impact of the near-term rate hikes on growth prospects for the world's biggest economy.
The Federal Reserve, as expected, boosted its benchmark Fed Funds rate by 50 basis points, to a range of 0.75% to 1%, while detailing the first official plans to reduce its $8.9 trillion balance sheet. Chairman Jerome Powell, however, added a dovish caveat to the decision, suggesting that core inflation may have peaked and that a 75 basis point rate hike is not being "actively considered" by policymakers.
However, while the Fed appears to have won back the approval of Wall Street through both its telegraphing of yesterday's rate hike and the rare specificity of plans to use 50 basis point moves in the future, the fact that it's hiking rates into a slowing economy, raising the specter of a near-term recession, was not lost on the Chairman.
In an unusual move prior to his regular question-and-answer session with the media yesterday in Washington, Powell spoke directly to the American public, recognizing the "hardship inflation in causing" and vowing to "expeditiously bring it back down."
"We are on a path to move our policy rate expeditiously to more normal levels," Powell said. "Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the Committee that additional 50 basis point increases should be on the table at the next couple of meetings."
Those comments powered U.S. stocks to impressive end-of-session gains, with the Dow closing 932 points higher and the S&P 500 rallying to its strongest single-day gain since May of 2020.
That momentum provided a solid early boost to European shares, which were trading in the green much much of the session before sliding 0.34% in late-day Frankfurt dealing, and laid a comfortable runway for the Bank of England, which boosted its Bank Rate by 25 basis points, to 1%, in its fourth rate hike in five months today in London.
Yesterday, 10-year Treasury down 9 basis points. Today, 10-year Treasury up 18 basis points.
Makes sense to me. Higher interest rates reduces the value of future earnings, especially those that are 5 or 10 years in the future.
Stocks are nothing more than a casino bet theses days.
Facebook that produces nothing being worth more than Boeing, give me a break!
Real estate, bonds, and cash are where it is at.
It is illogical to believe inflation has peaked
1. Government is still massively inflating the economy with deficit, wasteful spending.
2. Interest rates are highly negative in real terms.
3. Labor is getting killed and demands for wage increases have not even begun to happen, which will kick off round two of inflation
4. I, personally, have seen nothing in stores to show me that either prices are easing or supply is being fixed, on anything.
The Fed Reserve has done little to but talk wishful thoughts.
Real estate is vulnerable to rising rates.
Next thing that will happen will be the Left comparing the pre-Hitler Germany economy and how he came to power with Trump running for President in 2024.
Social unrest and temper-tantrums will be the order for the Summer of Love part II, electric bugaloo 2022 to try and thwart the tidal wave coming in Novemember.
And it was massively down the day before that...
Just released: 7.5% decline in productivity, 11%+ increase in labor costs ... so lots more inflation on the way equals lots more rate hikes equals lots of market downside
Rates are going higher and the market is going lower, FJB.
There are people I know that saying housing can’t crash again. I think it sure can and higher interest rates are the first hint. It could be a lot worse than 2008’s too.
It can in certain markets. It will correct in other hot markets like Nashville, Florida, Boston, etc.
Isn’t volatility common before crashes?
Truly asking.
Investors realized bonds are now preferable to stocks in yield. Also auto sales, home sales are likely to go down, also as credit card interest increases there could be less spending and with monthly payments going up, less disposable income. Stagflation is knocking at the door. Recession is pulling into the driveway and depression is accessing the car’s GPS to guide it here.
Well just as I predicted once the Fed started jacking interest rates the economy will slow quickly and recession will take hold, who knows we may be looking at the beginning of a Depression with these clowns in charge..The consumer is pulling in their spending horns and cutting back on spending, foreclosures and repos growing, bankruptcies will be order the day..
Happy Stinko de Mayo.
(May 1 was Pinko de Mayo.)
Nasdaq down over 5%!
The Boyz are stealing money again. For the fools that went long yesterday, thank ya.....
The commodities market is on fire.....
I agree. Stocks have a long way to go to correct for a recession.
take a look at the dow performance from say 1978 to 1982 it dropped 30%. I can see our market dropping by that much from the highs of around 37,000. So we could see a 10,000 point drop, right now were down 4,000, another 6,000 to go.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.