Stocks on the other side of the Atlantic recorded a session of gains, recovering from recent declines, but the end of the Fed meeting ended that scenario.
Investors were taking the opportunity to buy the stocks that had fallen in value (so-called “buy the dip”), but the sell-off returned as soon as the central bank chief, Jerome Powell, spoke. Only the Nasdaq was able to return to positive territory after that, although the Dow and the S&P 500 managed to pare part of the losses in the past few minutes.
The Dow Jones Industrial Average closed down 0.38% to 34,168.09 points, while the Standard & Poor’s 500 ended 0.15% lower to 4,349.93 points.
On the other hand, the Nasdaq Tech Composite Index, which has been in correction territory for a week, fell more than 1% after Powell’s speech, but managed to gain enough momentum in the last minutes to return to the green, after ending with marginal gains of 0.02% to 13539.30 points.
Contributing to the comfortable rallies recorded during most of the session were the fact that Powell announced – after the release of the Federal Reserve statement that Possible rise in interest rates as early as March – which does not exclude an increase in prices at all meetings of the Federal Open Market Committee, which was a departure from everything that has been indicated so far.
Until the end of the year, the Federal Open Market Committee holds six more meetings: in March, May, June, July, September, November and December. This means that the Federal Reserve may raise interest rates seven times this year.
Powell, at his press conference, stated that the Federal Reserve is on the move to raise interest rates as early as March, thus meeting what was expected. However, he stressed that the Fed has not made a decision yet and that March is still too late. Thus, the country’s economic situation may change by then, CNN Business assures.
In the words of the Federal Reserve Chairman, US stock markets have returned to negative territory, given that no one expected speech with such a “hawk” status.
Powell also emphasized that inflation will decline throughout the year, but for now, inflation risks remain on an upward trend.
The central bank chief noted that raising interest rates could be achieved earlier and faster than the fastest pace of increases in recent history, which occurred in 2015, when the increases occurred “meet a yes, meet a no.”
“We know that the economy is in a different situation than it was when we started raising interest rates in 2015,” he said. “More specifically, the economy is now more resilient, the labor market is more robust and inflation is well above our 2% target — much higher than it was in 2015. These differences are likely to have significant implications with the appropriate speed of monetary policy adjustments.”
Jerome Powell also stated that the problems in the semiconductor market are expected to persist beyond 2023, which has contributed to exacerbating the pessimism in stock markets.
“With major indices looking red since the beginning of the year, the 2022 scenario turns completely gray towards the end of January, the month that is usually a barometer of what will happen in the rest of the year. 13.5%, Nasdaq is clearly weaker than its partners, The S&P500 is down around 9% and the Dow Jones is 6%, which shows that the cost to higher interest rates is greater growth, but with longer profit periods,” emphasized Marco Silva, an advisor at ActivTrades, in his daily analysis.
Investors also remain attentive to the display of technology accounts. After Netflix on Thursday, IBM this week and Microsoft yesterday, it will be Tesla’s turn today to release its results after stock markets close. Tomorrow follows Apple.
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