(Financial) Roundup: Hawkish signals from the Fed dragged stocks down in New York

2022-05-25 0 By

New York, April 6 (Xinhua) –As the US Federal Reserve continues to send hawkish signals, the market’s expectations for a more aggressive monetary policy by the Federal Reserve have risen and taken into consideration in trading.When the minutes of the latest Federal Reserve monetary policy meeting were released, the three major stock indexes in New York stock Market fell significantly for two consecutive days on May 5 and 6.The Dow Jones Industrial Average, THE S&P 500 index and the Nasdaq Composite index fell 1.22%, 2.21% and 4.43% respectively over the past two trading days, data showed, with the technology sector suffering significantly.Federal Reserve officials believe several 50 basis point rate hikes are likely at their next meeting, especially if inflationary pressures remain high or intensify, according to minutes of their March monetary policy meeting released Wednesday.The minutes also showed that Fed officials overall agreed to shrink the Fed’s balance sheet by as much as $95bn a month, most likely starting in May, close to the $100bn a month that markets had expected.James Cullen, head of macro strategy for global fixed income at Morgan Stanley Investment Management, said equity markets now recognise that the Fed’s monthly reduction of $60bn in Treasuries and $35bn in agency mortgage-backed securities will be a reality.If the Fed raises rates by 50 basis points at both its May and June meetings, that would be negative for stocks.Ryan Detrick, chief market strategist at LPL Financial, said more Fed officials were already leaning in favor of a 50 basis point hike, which could well materialize at the next rate-setting meeting.Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said Thursday that he is very concerned about higher inflation and expects a series of interest rate hikes this year as more data are released.The yield on the 10-year Treasury rose 4.4 basis points to 2.599 per cent, after rising as high as 2.66 per cent.Federal Reserve Board Member Lael Brainard said on Friday that it is now essential to lower inflation, and the Fed’s monetary policy tightening will include a rapid reduction of the balance sheet and steady increases in interest rates.Brainard’s latest comments are seen as a sign of a hawkish consensus among Fed officials, as she has previously advocated avoiding tightening monetary policy too quickly, UBS said on Monday.The MARKET sees a 77.1 percent chance that the U.S. central bank will raise rates by 50 basis points at its May meeting, up from 67.2 percent a week ago and 27 percent a month ago, the CME Fed Watch tool showed Tuesday.The Fed had already begun its cycle by raising rates by 25 basis points in mid-March.(after)