Reporters reported that The Dow Jones Index continues to decline. Recently, it has fallen more than 600 points, falling off the 30,000 line amid concerns that The Federal Reserve’s overly strict monetary policy will put the US economy on the brink of recession.
In addition, the market was also pressured by the S & P. Global revealed that The Purchasing Managers’ Index (PMI), the U.S. primary manufacturing and services sector, contracted for the third month.
As of 11:38 p.m. GMT, the Dow Jones Industrial Average was 29,377.88, down 698.80, or 2.32%, while the S&P 500 and Nasdaq were both down 2.22%.
All stocks fell today. Led by energy stocks following the plunge in oil prices.
The Dow is expected to close down for a fourth day today and is likely to drop for the fifth week in six weeks.
The Dow has dropped 2.4% since the beginning of the week. and is now near the lowest level this year that was set in June. The S&P 500 and Nasdaq were down 3 percent and 3.3 percent, respectively.
Steve Hanks, a professor of economics at Johns Hopkins University, said there was an 80 percent chance the US economy would enter a recession. If the Fed continues its balance sheet (QT) cuts
“The Fed has been fueling inflation by injecting massive amounts of money into the system since 2020, driving prices higher. because consumers are willing to pay more for their purchases.” Mr Hank said
A CNBC survey found that analysts and fund managers had predicted a 52 percent probability that the US economy would enter a recession over the next 12 months.
The yield on the two-year US Treasury is sensitive to the Fed’s monetary policy. It jumped above 4.2 percent today, hitting a 15-year high and well above the 10-year and 30-year U.S. Treasury yields.
The short-term bond yields rebounded higher than the long-term. As a result, the US bond market has an inverted yield curve, signaling a recession.
The Fed has voted to raise the short-term interest rate by 0.75% to 3.00-3.25 percent at this session. It also signaled that the Fed will continue to raise interest rates until it hits 4.6% in 2023.
However, in its policy interest rate forecasts (Dot Plot), Fed officials expect no rate cuts until 2024. will cause the long-term interest rate to drop to 2.9%
Fed officials forecast interest rates to hit 4.4 percent at the end of the year and 4.6 percent at the end of 2023, before slowing to 3.9 percent in 2024 and flat at 3.9 percent in 2025. The long-term interest rate is 2.5%.
The investors expect that The Fed will continue to raise interest rates at the remaining two meetings this year. After removing the signal from the Dot Plot and the statements of Fed Chairman Jerome Powell
Mr Powell said He will not consider a rate cut until he is confident that inflation figures fall toward the Fed’s target of 2%.
In addition, Mr Powell warned that Fulfilling the mission of controlling inflation May affect the expansion of the US economy and labor market.
Investors expect the Fed to raise interest rates by 0.75% at its monetary policy meeting in November. and increase another 0.50% in December if the Fed raises the interest rate as expected. This will result in the Fed raising interest rates by 0.75% four times in a row in June, July, September and November meetings. Meanwhile, the Fed’s policy rate will hit 4.25-4.50% by the end of the year. And it will keep the interest rate above 2.50%, the level the Fed considers neutral. without being too relaxed or too strict
For a CNBC survey, Wall Street analysts predicted that The Fed will continue to raise interest rates until they hit their highest level. and will maintain the interest rate at this level for some time The Fed will use a “hike and hold” interest rate measure instead of the “hike and cut” measure previously predicted.
The results of the survey indicated that Analysts expect the Fed to continue raising interest rates until it hit 4.26 percent in March. The Fed is expected to keep interest rates at that level for nearly 11 months, the average of analysts who expect the Fed to hold interest rates for three to two years.
In addition, analysts say there is a 52 percent probability that the US economy will face a recession over the next 12 months. Due to the Fed’s use of monetary policy too tight.
At the same time, analysts say the Fed will take several more years. Before it succeeded in controlling inflation to its 2% target, the Consumer Price Index (CPI) on an annualized basis was expected. It will stay at 6.8% at the end of 2022 and 3.6% at the end of 2023, before falling to the Fed’s 2% target in 2024.