U.S. stock market falls on fears of hawkish Fed

The U.S. stock market’s main indexes fell on Tuesday after U.S. Federal Reserve Governor Lael Brainard said she expects rapid reductions to the central bank’s balance sheet.

Inflation

Reuters:

The tech-heavy Nasdaq led losses as expectations of quicker interest rate hikes dulled the appeal for high-growth stocks. Amazon.com Inc, Apple Inc, and Nvidia Corp fell between 1.4% and 3.8%.

“What is spooking the market is the phrase ‘at a rapid pace’ because that implies they (Fed) will not only allow bonds to mature, but will also be selling bonds in order to get to a more neutral policy by the end of the year,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “That’s what’s causing investors to be concerned – the speed and aggressiveness of the Fed with its balance sheet reductions.”

Investors now expect nearly 78.8% odds of a 50 basis points rate hike at the U.S. central bank’s meeting in May, a slight rise from 74.9% in the previous session, according to CME Group’s Fedwatch tool.

MacDailyNews Take: It’s hardly shocking that interest rate hikes are coming, yet its a good bet that the Fed still won’t move fast or high enough.

Earlier this year, Interactive Brokers founder Thomas Peterffy said, “Inflation is 7% — 1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”

Inflation is repudiation. — Calvin Coolidge

When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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7 Comments

  1. Up and down, up and down. I never worry about this. The stock market will be just fine. the rest of us? That remains to be seen. We do not live our lives in the milliseconds the market exists within, and by and large, given that most of us have not invested our entire livelihoods in stocks, it’s kind of pointing to the wrong issue. The middle class was the strongest class 40 years ago, and we couldn’t be further from that if we tried, which apparently, we are. I could give a **** about what’s ahppening to the market; they will recover. The rest of us? I have no idea. People do funny things when they are hungry, and that’s all i’ll say.

    1. If you save more than you make, you can build an emergency fund, followed by actual investments. Mutual Funds based on stocks are a solid investment. The Stock market have NEVER been down over a five year period. Ever…
      So I don’t quite know what you are blathering about.

  2. WRONG
    1929 crash 22 years to break even
    1973 crash took 8 years to break even
    2000 crash took 6 years to break even
    2007 crash took 5 years to break even

    Maybe you should blather less yourself

    1. Source??? What index???

      Are you now claiming the recovery after the ’07 Bush Crash wasn’t the slowest? We had to endure years of your whining claiming the opposite.

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