Investors are still recalibrating their moves after the Federal Reserve’s signal last week that it may raise current ultra-low rates sooner than had been expected. That gave the Dow Jones Industrial Average its worst weekly loss since last October.
Part of the Fed’s mission is to keep prices under control. The fear is that burgeoning inflation may prompt central banks to dial back the lavish support that has lifted markets to new highs after they plunged at the onset of the coronavirus pandemic last year.
Until its latest policy meeting, last week, the Fed had indicated it viewed recent price hikes as transient and would let the recovering economy run hot. Now it's forecasting raising interest rates twice in 2023.
“The shift to an earlier timeline for a rate hike, accompanied with an upward revision in core inflation forecast to 3%, seems to suggest that the Fed may still be concerned about inflationary pressures to some extent as opposed to its previous stance of letting inflation run wild,"
On Friday, the S&P 500 fell 1.3% to 4,166.45 in a broad retreat, while the Dow Jones Industrial Average lost 1.6%, to 33,290.08. The Nasdaq composite fell 0.9% to 14,030.38.
Markets were spooked after St. Louis
It’s an acknowledgment that a rebounding economy with near-record prices for homes and stocks may not need super low rates much longer. A recent burst of inflation may also be upping the pressure. But any pullback in Fed support would be a big change for markets, which have been feasting on ultra-low rates for more than a year.
The Dow industrials lost 3.5% last week. The Nasdaq composite, which has more high-growth tech stocks, dipped a much more modest 0.3%.
Still, the major
A measure of nervousness in the stock market, known as the VIX, rose Friday but is only back to where it was about a month ago.
In other trading,