Federal Reserve Latest price hike It is expected to keep the markets on alert next week. Wall Street will be closed on Monday, with markets monitoring June for the first time.
Last week, the S&P 500 She recorded her worst weekly performance Since March 2020, it has lost 5.8 percent after falling into a bear market on Monday. This drop also marks the 10th loss for the benchmark in the past 11 weeks.
US central bank on Wednesday Raised the benchmark interest rate By 75 basis points, the largest increase in nearly three decades. Federal Reserve Chairman Jerome Powell also hinted at more tightening ahead as policymakers step up their fight against inflation.
The Dow Jones Industrial Average is down about 5% for the week, briefly dropping below the 30,000 level. The Nasdaq pared some losses to close higher on Friday but still approached the week in the red, down around 1.7%. On Saturday, the price of Bitcoin (BTC-USD) Dropped to less than $18,000 For the first time since 2020, risky assets continue to face pressure.
“The most important takeaway from investors is that inflation is getting the Fed’s attention and they are taking it seriously,” said Chris Zaccarelli, chief investment officer of the Independent Alliance. “Despite the fact that high interest rates – all things being equal – hurt risk assets, it is more important to control inflation and to change fast (and flexible) from 0.5% to 0.75% in a very short time, and also demonstrated a new willingness to fight inflation with actions rather than sayings”.
While the Federal Reserve’s unprecedented action on Wednesday reiterated its commitment to normalizing price levels, investors and economists fear that this also increases the risks of anti-inflation measures that could push the economy into recession.
“Our worst fears about the Fed have been confirmed: They have fallen far behind the curve and are now playing a dangerous game of catch-up,” analysts at Bank of America said in a note on Friday. The company has lowered its GDP growth forecast to nearly zero and expects a 40% chance of a recession next year.
The bank’s research team noted that “in the spring of 2021 we argued that the greatest risk to the US economy was the boom and bust scenario.” “Over time, the boom and bust scenario has become our primary expectation.”
Meanwhile, at JPMorgan, analysts warned that a dip in the S&P 500 indicated an 85% chance of a recession.
All eyes will remain on Powell in the coming week, when the Fed chair is scheduled to testify before the US Senate Banking Committee on Wednesday morning.
The Fed chief has remained adamant that the US economy can avoid an economic slowdown, even as market participants lose faith in the potential for a “soft landing” – a period in which economic growth slows enough to suppress inflation but not stimulate deflation.
“We’re not trying to create a recession right now, let’s be clear about that,” Powell told reporters on Wednesday. in Statements at a conference In Washington on Friday, Powell also doubled the central bank’s target to rein in high price levels.
“My colleagues and I are very focused on getting inflation back to our 2% target,” he said. “The Fed’s strong commitment to our mandate for price stability contributes to broad confidence in the dollar as a store of value.”
Neither Wall Street nor business leaders seem to share Powell’s optimism.
a The survey released by the Conference Board found 60% of CEOs and other CEOs worldwide believe that their geographic region will enter a recession by the end of 2023. About 15% of CEOs say they believe their region has already entered a recession.
Models from Bloomberg Economics indicate that the risk of a recession has risen to more than 70%.
Another major sentiment gauge is due to be released next week. The University of Michigan is to publish the final reading of its sentiment index for June. The Initial reading of the poll for the month of June It has fallen to an all-time low as inflation affects consumers.
Monday: There are no notable reports scheduled for release.
Tuesday: Chicago Fed National Activity IndexMay (0.47 over the previous month), Existing Home SalesMay (expect 5.40 million, 5.61 over previous month), Existing Home SalesMoM, May (expect -3.7%, -2.4% over previous month)
Wednesday: MBA Mortgage Applicationsweek ending June 17 (-6.6% over the previous week)
Thursday: The current account balanceQ1 (expected $279.0 billion – $217.9 billion during the previous quarter), Unemployment Complaint Ratesweek ending June 18 (expect 232,000, 229,000 over the previous week); Ongoing Claimsweek ending June 11 (expect 1.328 million, 1.312 million over the previous week); Standard & Poor’s global manufacturing in the United StatesPre-June (expect 56.3, and 57 over the previous month); S&P Global US Services PMIPre-June (expect 53.5, 53.4 over the previous month); S&P Global US Composite PMIintroductory June (53.6 over the previous month); Federal Manufacturing Activity in Kansas CityJune (23 over the previous month)
Friday: University of Michigan sentiments, June final (expect 50.2, 50.2 over previous month), Current conditions for the University of MichiganJune final (55.4 over the previous month), University of Michigan PredictionsJune Final (46.8 over the previous month), University of Michigan swells for a yearJune final (5.4% over the previous month), University of Michigan swell 5-10 yearsJune final (3.3% over the previous month), New home salesMay (595,000 expected, 591,000 over the previous month), New home salesMoM, May (0.7% expected, -16.6% over the previous month)
There are no notable reports scheduled for release.
Before the market opens: linar company (flexible)
After market close: La Ze Boy Incorporated (LZB)
After market close: KB Home (KBH)
Before the market opens: Carmax (KMX)
After market close: There are no notable reports scheduled for release.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed