The Federal Reserve isn’t trying to slam the stock market as it rapidly raises interest rates in its bid to slow inflation still running red hot — but investors need to be prepared for more pain and volatility because policy makers aren’t going to be cowed by a deepening selloff, investors and strategists said.
“I don’t think they’re necessarily trying to drive inflation down by destroying stock prices or bond prices, but it is having that effect.” said Tim Courtney, chief investment officer at Exencial Wealth Advisors, in an interview.
U.S. stocks fell sharply in the past week after hopes for a pronounced cooling in inflation were dashed by a hotter-than-expected August inflation reading. The data cemented expectations among fed-funds futures traders for a rate hike of at least 75 basis points when the Fed concludes its policy meeting on Sept. 21, with some traders and analysts looking for an increase of 100 basis points, or a full percentage point.
Preview: The Fed is ready to tell us how much ‘pain’ the economy will suffer. It still won’t hint at recession though.
The Dow Jones Industrial Average
logged a 4.1% weekly fall, while the S&P 500
dropped 4.8% and the Nasdaq Composite
suffered a 5.5% decline. The S&P 500 ended Friday below the 3,900 level viewed as an important area of technical support, with some chart watchers eyeing the potential for a test of the large-cap benchmark’s 2022 low at 3,666.77 set on June 16.
See: Stock-market bears seen keeping upper hand as S&P 500 drops below 3,900
A profit warning from global shipping giant and economic bellwether FedEx Corp.
further stoked recession fears, contributing to stock-market losses on Friday.
Read: Why FedEx’s stock plunge is so bad for the whole stock market
Treasurys also fell, with yield on the 2-year Treasury note
soaring to a nearly 15-year high…