Wall St drops as jitters over Fed rate hike policy return

Record ID: 1700898

  • Title: Wall St drops as jitters over Fed rate hike policy return
  • Date: 5th December 2022
  • Summary: CLEVELAND, OHIO, UNITED STATES (DECEMBER 5, 2022) (REUTERS) (SOUNDBITE) (English) CHIEF INVESTMENT OFFICER FOR CBIZ INVESTMENT ADVISORY SERVICES, ANNA RATHBUN, SAYING: "In a nutshell, it's strong economic data. It means more room for the Fed to implement a hawkish view. And those data include better-than-expected factory orders, durable goods, and in particular, the ISM Service Index came in very strong. And in the service index, we had details like sticky prices on the prices paid side and a very strong employment subindex -- the two very things that go against the Fed pivot narrative. This is really interesting because Chairman Powell was very hawkish last week and the markets actually didn't interpret it that way. They were cherry-picking the 50-basis point signal and markets went up. Well, today, it's a little bit more sober." WHITE FLASH (SOUNDBITE) (English) CHIEF INVESTMENT OFFICER FOR CBIZ INVESTMENT ADVISORY SERVICES, ANNA RATHBUN, SAYING: "Goods prices fluctuate much more quickly than service prices. Think about housing, and dental care, these prices here tend to change more slowly, and once it goes up, they tend not to come down. And that's the stickiness and the stubbornness and inflation that the Fed is worried about." WHITE FLASH (SOUNDBITE) (English) CHIEF INVESTMENT OFFICER FOR CBIZ INVESTMENT ADVISORY SERVICES, ANNA RATHBUN, SAYING: "I do think that the Fed is going to stick to its word and keep rates higher for longer. And the thing about rates is that it doesn't impact the economy right away. They started raising rates in March of 2022, and we're sort of coasting along. I mean, there's been some weakness here and there. But if you look at the services index, it's pretty strong today. So the American economy is very resilient, but there's always a lag in the Fed's rate policy actually impacting the Main Street. So we're expecting recessionary pressures definitely coming in 2023, but maybe not until halfway through the year, maybe if it's early, second quarter, and it's because of that lag."
  • Embargoed: 19th December 2022 21:23
  • Keywords: Fed Wall Street inflation recession
  • Location: VARIOUS
  • City: VARIOUS
  • Country: US
  • Topics: Economic Events,North America,Equities Markets
  • Reuters ID: LVA002462905122022RP1
  • Aspect Ratio: 16:9
  • Story Text: U.S. markets ended Monday (December 5) lower, as investors spooked by better-than-expected data from the services sector re-evaluated their thinking on the Federal Reserve's interest rate policy, while shares of Tesla slid on reports of a production cut in China.
    The electric-vehicle maker slumped on plans to cut the December output of the Model Y at its Shanghai plant by more than 20% from the previous month.
    This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline.
    Broadly, indexes suffered as data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.
    The data came on the heels of a survey last week that showed stronger-than-expected job and wage growth in November, challenging hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.
    Investors see an 89% chance that the U.S. central bank will increase interest rates by 50 basis points next week to 4.25%-4.50%, with the rates peaking at 4.984% in May 2023.
    The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.
    The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan, Citigroup, and BlackRock among those that believe a recession is likely in 2023.
    The S&P 500 lost 72.86 points, or 1.79%, to end at 3,998.84 points, while the Nasdaq Composite lost 221.56 points, or 1.93%, to 11,239.94. The Dow Jones Industrial Average fell 482.78 points, or 1.40%, to 33,947.10.
    (Production: Roselle Chen)
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