US stocks came under pressure on Tuesday as Treasury yields soared to levels not seen in many years, as traders braced for the Federal Reserve’s hawkish decision that is expected to raise interest rates to pre-2008 financial crisis levels.
Stocks’ slide following rallying on Monday sent the S&P 500 down more than 10% from its August 16 high, the peak of the rally from its June lows.
During Tuesday’s trading, regarding 93% of the index companies declined, with all major groups retreating. As I approached Bond yields For two years of 4%. Investors are also watching geopolitical developments amid news that the Kremlin is hastily moving to hold a vote to annex areas still controlled by Russian forces in Ukraine.
Federal Reserve officials are regarding to put more of the “pain” they have warned regarding when they release new forecasts for the economy on Wednesday. Where expectations are expected to show a significant rise in unemployment rates in the future as the price to be paid to reduce inflation. Officials are also widely expected to raise rates by 75 basis points at a time when few market watchers say a full point rate hike may also be on the table.
For Charlie McEligot, multi-asset strategist at Nomura Securities International, the market is underestimating the likelihood that the Fed will choose a move 100 basis points larger. In addition to the inflation surprise last week, Charlie cited the fact that both the labor market and wages remain “hot” since Federal Reserve Chairman Jerome Powell’s speech to Jackson Hole at the end of August.
According to a Bloomberg survey, only two of the 96 analysts surveyed expect a full percentage point increase this month.
“The idea of the Fed raising interest rates and cutting them immediately once more in mid-2023 should be frozen,” said Gargi Choudhury, head of iShares investment strategy for the Americas at BlackRock. He emphasized the need for the Fed’s tough stance, saying, “We believe we are entering a new regime characterized by high structural volatility and slower growth.”
Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession occurring at the end of 2022 that might continue throughout 2023 and a sharp correction for the S&P 500. “Even in a simple soft recession, the S&P index 500 might drop 30%.” And in the case of a “real hard fall” he expects, the index might drop 40%.