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US STOCKS FELL ON FED’S DECISION TO MEET 3.4% INTEREST RATE TARGET AT THE END OF 2022

Harvest Global Markets :

US stocks shed on Thursday in Asia after showed some momentum on Fed decision as US interest rate increased 75bps to 1.75% from 1.00%, largest increase since 1994. The major indices included Dow Jones, Nasdaq and S&P 500 closed in green on Wednesday but all are still near to year’s low. They broke five days losing streak but did not indicate good momentum. The 30-stock benchmark added about 304 points, or 1%, while the S&P 500 advanced 1.46%. The tech-heavy Nasdaq Composite was the relative outperformer, rising 2.5%.

Stocks surged on decision after Fed Chairman Jerome Powell said he could point out the same rate hike possibility in the next couple of meetings. July’s meeting is now anticipating 50 to 75 bps rate hike, indicating central bank’s commitment to overcome inflationary pressure. Members are forecasting 3.4% Fed rate at the end of 2022 with four meetings left in a year.

Despite Wednesday’s bounce, the major averages are still lower over the last week and month, and remain sharply below their records. The S&P 500 and Nasdaq Composite are both in bear market territory, down roughly 21% and 32% from their all-time highs in January and November, respectively. The Dow, meantime, is 17% below its Jan. 5 all-time intraday high. Rampant inflation, which is at the highest level in 40 years, has weighed on the major averages, as have fears around slowing economic growth and the possibility of a recession.

Fed participants are also targeting further rise in interest rates in 2023 and then start to cut basis points gradually in 2024 to stabilize the economy overtime. Moreover, they also signaled economic growth slow down (1.7% growth forecast down from 2.8%) with cooling inflation to 5.2% rather than 3.4% at the end of 2022 and 3.7% unemployment rate as an upward revision from 3.5% previously forecasted.

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