U.S. stock indexes were set to open lower on Monday on worries over the Federal Reserve’s plan to keep raising interest rates in its fight against rampant U.S. inflation in the midst of recession.
Fed Chair Jerome Powell said on Friday that the U.S. economy would need tight monetary policy “for some time” before inflation is under control, knocking Wall Street’s main indexes down more than 3%.
Money market traders are pricing in a 64.5% chance of a third straight 75-basis-point interest rate hike in September and expect the Fed funds rate to end the year around 3.7%.
The benchmark S&P 500 index has climbed 11.6% since mid-June but is still in a bear market after plummeting early this year. Some investors fear a tough September due to seasonal weakness and nervousness about the economic pain from interest rate hikes.
Heavyweight technology and growth stocks such as Apple Inc, Amazon.com, Nvidia Corp, and Tesla Inc were down between 1.3% and 2.1% in premarket trading, hit by rising U.S. Treasury yields.
MacDailyNews Take: The Fed’s current target interest rate range is 2.25% to 2.50%.
In January, Interactive Brokers founder Thomas Peterffy said, “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%.”
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
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