Stocks Drop as Robust Economic Data Hikes Rate Worries

A brisk leap in treasury revenue addled Wall Street on Wednesday. This significantly reduced stocks at the beginning of another month, which was a turbulent year for the market. The S&P 500 ended 0.7% lower; it quickly gave way to volatile trading after the early morning rise. The Dow fell 0.5%, while the Nasdaq fell 0.7%.

Shares began to fall shortly after several reports on the U.S. economy, which showed that production growth last month was more substantial than expected. This boosted investor expectations that the Federal Reserve would continue to raise interest rates aggressively, Hoping to contain inflation to slow the economy.

According to strategists, investors are worried about the approach of the Fed meeting; Also, because inflation is expected to remain stubbornly elevated, The Fed probably won’t bother loading the front of the rate-tightening cycle and then suspending it in the fall.

The S&P 500 fell to 4,101.23, or 30.92 points. The Dow dropped 176.89 points to 32,813.23 points after losing early gains. The Nasdaq Composite fell to 11,994.46, for a total of 86.93 points. It also ended in red after rejecting an early 1.3% gain. Small-company stocks have also lost their place. The Russell 2000 Index rose 9.22 points to 1,854.82 and lost 0.5%.

Daily market fluctuations have become routine on Wall Street, Against the background of concerns that the federation’s very aggressive rise in rates could push the economy into recession. Even if it can prevent the economy from collapsing, Higher rates reduce the pressure on stocks and other investments. Meanwhile, huge inflation takes away corporate benefits. As well as the war in Ukraine and the slowdown in business, anti-COVID-19 restrictions aggravate markets in China.

Stocks and the Fed

The Fed has indicated it may continue to raise key short-term interest rates, Double the usual amount for upcoming meetings in June and July. Last week, there was speculation that the Fed might consider a pause in its September meeting. This contributed to the growth of shares. However, such hopes were dashed after a production report on Wednesday from the Institute of Supply Management.

This displayed that the U.S. production rise accelerated last month, against to economists’ beliefs of a slowdown. A separate report says the number of jobs in the economy shrank slightly in April; however, it is much higher, at 11.4 million, than the unemployed. After the reports, traders are now betting on a 60% probability; That the Fed will raise its benchmark interest rate to 2.50% at the September meeting.

A week ago, most bets were low, in the 2% to 2.25% range. The two-year Treasury yield, which likely to pursue the expectations of the Fed actions, hiked along with those hopes. In total, it increased to 2.66%. Wednesday also marks the start of the Fed’s program to repay the trillion dollars in treasury and other bonds it has accumulated during the pandemic. Such action should put tention on long-term rates.

Conclusion

European markets will rise on open Thursday as traders assess new inflation and economic activity data. The DAX has risen to 14,362. The CAC rose 15 points to 6,429. The FTSE 100 is closed on Thursdays and Fridays to mark the Queen’s Platinum Jubilee.

European traders are still catching up with eurozone inflation figures, which reached 8.1% a year in May; This exceeded expectations and is the seventh record in a row. Investors are watching the European Central Bank closely; To get hints about the rate and scale of the interest rate growth, Which is needed to reduce consumer prices.

Russia’s attack on Ukraine is also spotlighted in the recent EU statement on a partial ban on Russian oil imports. OPEC and non-OPEC oil producers, including Russia, will meet on Thursday for a regular political meeting. Asia-Pacific shares fell in trading on Thursday; Australia’s April trade surplus was higher than expected. The Hang Seng Index caused a loss in the region as it fell by 1.67%. Alibaba shares fell more than 3%. On Wall Street, U.S. stock futures changed slightly on Thursday morning; Economic concerns have slowed investor sentiment.

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