Weekly Wins: The Fed minutes shocked the market. What you need to know.
The market slide sharply
U.S. equities deepened losses Wednesday and technology stocks plunged for a second day as rising Treasury yields added to growth concerns. Shares in Asia-Pacific fell on Thursday, following in the footsteps of the U.S. overnight.
$S&P 500 Index(.SPX.US$ and $Dow Jones Industrial Average(.DJI.US$ both fell over 1%, while the tech-heavy $Nasdaq Composite Index(.IXIC.US$ saw its biggest one-day loss since February, losing 3.34%.
What happened
Minutes from the Federal Reserve flagged the chance of earlier and faster interest rate hikes. Traders increased conviction the U.S. central bank will increase rates at least three times this year.
Why such angst?
Higher interest rates may increase the corporate borrowing cost, which may negatively affect the demand needs of consumers and the expansion of companies.
Higher interest rates may increase the corporate borrowing cost, which may negatively affect the demand needs of consumers and the expansion of companies.
“Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate,” the meeting summary stated.
Analyst opinions
The market is still digesting the information. Traders are preparing for the worst.
“If the Fed starts shrinking the balance sheet that’s going to be disastrous,” according to Infrastructure Capital Management CEO Jay Hatfield. If that happens, “it’s not just that they’re not injecting liquidity, they’re taking liquidity out,” Hatfield added.
We don’t have any more information about what the Fed is thinking than we did several weeks ago,” Brian Nick, chief investment strategist at Nuveen, told CNBC.
“If those concerns creep in, and right now I think they are concerns, not alarm, you could see valuations pressured across the board in the equity market which would tend to favor lower valued, more cheaply valued companies.”
The bottom line
Predicating the future trends is not the major task. Investors need to work on investment skills. Only being fully-prepared could help youweather whatever comes.
Daily fluctuations of the stock markets are directly or indirectly affected by the changes in macroeconomic factors.
To know more about the Federal Reserve, click to access the free course:
[Weekly Wins]
For more investment knowledge and trends, welcome to Courses in the Community.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Moomoo Learn Official Account
Easy learning at moomoo Learn.
Let's trade smarter！
20KFollowers
105Following
24KVisitors
Follow
HopeAlways : The Fed minutes appeared to trigger the most recent sell-off. Yet little that the Fed had mentioned should have come as a big surprise to investors given prior press conferences and releases. It appears that the pace of tapering and asset purchases and potentially raising rates as the main concern of investors. Not all sectors reacted negatively to the news with the same extent. Rather, it was mainly the sectors that saw the most share price gains that were most adversely impacted. Technology stocks took the brunt of the damage, with high growth ones suffering from significant declines. Perhaps, the lack of any shocking news seemed to show that investors were merely taking the opportunity to sell stocks that had witnessed the largest gains. Investors need to understand that market volatility is here to stay. The only certainty is that the market will likely remain choppy as investors attempt to digest the information they are getting. Nevertheless, that should not stop stocks from solid long term performance. What matters most is how investors need to feel confident about the stocks they own and be able to stomach any volatility with whatever news that come along the way.
Jeet Kune Do HopeAlways: Good writing on the Feds
102089245 HopeAlways: There is even greater need to stay calm and not panic sell the good ones even if share prices are dropping.
garay HopeAlways: Agree with you. The Fed has a huge impact on the movement of the market and news form the Fed usually causes volatility. Those stocks which took the hardest hit are probably those who are already overvalued and overbought. The news could have spooked these investors to quickly take profit or to stop loss. For investors who have done their fundamental analysis should not be worried for short term volatility and could DCA to buy at a discount.
101767718 HopeAlways: The market may have overeacted but good stocks will still be able to gain more in the long run.
Syuee : The Fed Minutes had shown that a tight jobs market and unrelenting inflation could require the U.S. central bank to raise rates sooner than expected. Likely, the market is overreacting again…
The minutes showed that Fed officials were similarly concerned about the pace of inflation.
Inflation indeed remains the top economic problem. It is being pushed higher both by supply shortages and demand fuelled by economic stimulus as well.
Those high-growth companies offering mainly promises rather than present profits are particularly vulnerable to higher interest rates, which may lower the present value of those future rewards.
The stock market typically reacts very strongly to changes in the target rate. Companies looking to borrow and expand their businesses face higher borrowing costs when the Fed raises rates. This can drive stock prices down because higher borrowing costs lower corporate profit margins.
To learn more about the Federal Reserve, please study the course - The Fed Explained via @moomoo Courses. You will learn why the Federal funds rate matters, the difference between US Treasury and Federal Reserve, etc.
You can literally find everthing you need before investing with @moomoo Courses.
Syuee HopeAlways: It is vital that investors feel confident about the stocks they own, especially so, for the longer-term investors with longer investment time horizon.
VCSuccess HopeAlways: That's so true. The stock market slide has given investors a chance to take some profits from those stocks with huge gains.
HopeAlways Syuee: For investors, the Fed Explained course on @moomoo Courses would provide a solid explanation on some key issues about the Fed that would matter in investment decisions.
Grow_My_Money : Fed rate hike is nothing new. There has been many prior reminders to this. It is always the investors’ reaction that spook the market
View more comments...