Strong losses on the Wall in anticipation of Fed practices

Significant losses for the second consecutive day are recorded by the Wall Street indices, as investors are on hold in anticipation of the publication of the Federal Reserve minutes, hoping to provide more details on the rate of decline of the US Federal Reserve balance sheet.

At the same time, investors are turning their attention to Ukraine, as today the US and its allies are expected to tighten sanctions against Russia, following the global outcry over revelations about mass graves and the killing of civilians in Ukraine. city ​​of Butsa.

In the middle of this climate, the Dow Jones industrial average lost 251.49 points or 0.73% and moved to 34,389.69 points, the broader S&P 500 fell by 51.02 points or 1.13% to 4,474.10 points, while the technological Nasdaq is under the most pressure and loses almost 300 units or 2.11%, reaching 13,905.07 units.

Expectations that the minutes from the last Fed monetary policy meeting will reveal its plan to reduce its balance sheet, amounting to almost 9 trillion. As part of a more aggressive policy to curb rampant inflation, Lael Brainard, vice president of the US Federal Reserve, gave a speech yesterday.

Brainard backed calls for more aggressive rate hikes aimed at reducing inflation, adding that the Fed is likely to start shrinking its balance sheet shortly after the next Federal Open Market Committee (FMOC) meeting in May.

The Fed Vice President’s comments have increased the pressure on growth stocks, which are more sensitive to changes in interest rates, while the simultaneous increase in government bond yields hits technology stocks, with these two stock categories also determining the picture on the board. on Wednesday.

But the pressure is spreading to other headlines as the Fed’s increasingly aggressive rhetoric heightens concerns that accelerating monetary tightening to reduce inflation could “kill” the economy.

“The Fed tightening remains the biggest medium- and long-term risk for equities, and it reminded us of that yesterday,” wrote Tom Essay, founder of Sevens Report Research, following Brainard’s comments yesterday.

Concerns have been heightened by Deutsche Bank, Wall’s first major bank to address the risk of recession, with economists predicting that US and European economies will shrink over the next two years.

Fears of a possible recession were also expressed by some analysts and investors last week when the yield on the US 2-year bond slightly exceeded the 10-year yield, temporarily reversing the yield curve.

This phenomenon is considered by many as a warning sign of a possible economic downturn, although some analysts stress that it is not a very good timing tool for investors.

The yield curve has meanwhile returned, as the 10-year yield is again higher than the 2-year yield, at 2.630% versus 2.546%.