Wall Street plunges ahead of Fed rate announcement

Share prices on the New York Stock Exchange tumbled on Monday as a week is expected to see a number of events likely to influence the market, from interest rate decisions around the world to earnings reports. of the major companies in the United States.

The S&P 500 lost 1.3%, giving back some of the gains it had made last week to reach its highest level since December. The Dow Jones Industrial Average fell 260 points, or 0.8%, while the Nasdaq Composite sank 2%.

Markets have been swinging recently on concerns that the economy and corporate earnings could be about to take a sharp fall, fears that have been offset by hopes that cooling inflation will prompt the Federal Reserve to ease. a bit about your position on interest rates.

The US central bank will make its next rate decision on Wednesday, and most investors expect it to announce a rise of just 0.25 percentage point. That would be the smallest increase since March, after a few increases of 0.75 points and then another of 0.50, and would mean less additional pressure on the economy.

Higher interest rates fight inflation by intentionally slowing down the economy, while also lowering investment prices. Inflation has subsided since the summer amid last year’s string of rate hikes, but the economy has also been showing worrisome signs.

The big question is whether Federal Reserve Chairman Jerome Powell will deliver on Wednesday afternoon what the markets want to hear—signals that the interest rate hikes will end soon and that there may even be rate cuts in the future. the next few months_, or it will stick to the Fed’s mantra that it plans to keep rates at high levels for longer, even if there is a mild recession.

For their part, the central banks of Europe and Great Britain are also scheduled to announce their most recent interest rate hikes in the coming days.

In addition to rates, more than 100 companies that make up the S&P 500 will report this week how much profit they made in the last three months of 2022. They include tech giants Apple, Amazon and Google’s parent company. Because these companies are three of the four largest on Wall Street by market value, their stock movements have much more impact on the benchmark than others.

Apple’s 2% drop on Monday, for example, wreaked the most havoc on the S&P 500.

This index fell 52.79 points, to settle at 4,017.77, and the Dow lost 260.99 units, settling at 33,717.09. The Nasdaq lost 227.90 integers and closed at 11,393.81.

The yield on the 10-year Treasury bond rose from 3.51% to 3.53%.