The stocks fell on wall street on Wednesday afternoon after an official from the Federal Reserve said that he central bank needed to keep increasing tax rates for control inflation. Observations made from the new data show that consumers will not reduce their spending more than in the past.
The S&P 500 is down 1.6%, the Dow Jones is down 1.8% and the Nasdaq Composite is down 1.2%.
The trade closed this week after two weeks of gains.
Technology stocks are among the largest players in the market. It fell 1.21TP3Q after Microsoft became the latest tech company to announce layoffs. The software giant is laying off 10,000 employees, around 5% of its staff.
Treasury yields fell sharply after the government said Americans were spending more than expected last month, the second decline in a row. The government also released more encouraging inflation data.
wholesale prices they went up 6.2% year-on-year in December, marking the sixth consecutive slowdown in price measurement before passing to the consumer.
The 10-year Treasury yield, which drives interest rates on mortgages and other loans, fell to 3,39% from Tuesday's 3,55%.
following expectations for further Fed action, the two-year wanted return fell to 4,09% from 4,16% before the publication of the latest economic data. On Tuesday night it reached 4,21%.
"Something seems to be moving inflation and retail sales in the right and softer direction," said Tom Martin, a portfolio manager at Globalt Investments. – The question is what it really means.
Wall Street expected lower inflation and slowing economic growth to influence the Federal Reserve's interest rate stance. The central bank has aggressively raised rates throughout 2022 in an effort to curb high inflation, but this has hurt stock and bond prices and risks going too far and triggering a recession.
While there are growing signs that high inflation is finally abating, more rate increases are still needed, according to Loretta Mester, president of the Federal Reserve Bank of Cleveland.
"I continue to see the greatest risk in strict pressure," Mester said in an interview with the AP news agency on Tuesday.
Mester emphasized his belief that the key interest rate on the fed should rise "slightly" above the range from 5% to 5,25% that policymakers have collectively projected through the end of this year.
The central bank raised the tax overnight by a range of between 4,25% and 4,50%, before almost zero a year had passed. The Fed will announce its next decision on the tax rate on February 1. Investors expect an increase of only 25 percentage points next month, less than the half-point increase in December and the previous four increases of 0.75 percentage points.
The overall economic picture is not yet clear enough to know whether the fight for the Federal Reserve against inflation is working well enough to avoid a recession. Many big banks predict a mild recession in at least 2023.
Investors are also looking at the latest corporate earnings to learn more about how inflation and consumer spending are affecting profits and revenue. Shares of PNC Financial Services Group fell 5.4 % after its failed earnings release.