Stocks Trading Have Investors Worry About Inflation and The Increase In Rates

After the minutes of the last meeting by the Federal Reserve were released, the stock market tried to take advantage of the gains that were generated that same day, but it failed.

Indices were in the green earlier; Nasdaq Composite and S&P 500 futures were flat, while Dow Jones Industrial Average futures were down 40 points (0.2%).

Minutes released by the Fed show the central bank remains concerned that interest rates remain too high, but stocks still managed to close with gains on Wednesday. The minutes confirm that the Fed focuses instead on inflation by aggressively raising interest rates to reduce economic demand; despite all these efforts, stocks are not selling.

This tranquility is also reflected in the bond market. One of the barometers of federal funds rate expectations, the two-year Treasury yield is at 4.428%, this is above its low point from Wednesday before the minutes were released but still below the multi-year high of just over 4.7%, reached near the end of 2022.

AvaTrade’s chief market analyst Naeem Aslam wrote: “However, in the minutes, there were no signs of mercy.” “The Fed is determined to continue raising rates and believes that inflation has a long way to go and that they will achieve price stability.”

Markets are still waiting for a quarter percentage point rate hike at the next Fed meeting. It’s a smaller hike compared to the last few sessions, but the concern is that the Fed may need to make several smaller increases throughout the year.

Stocks and Mutual Funds On Hold Pending Recession Review

We would see this clearly on Friday when the December jobs report is released.

Morgan Stanley’s Mike Loewengart said: “Amid a persistently strong job market, it makes sense that fighting inflation remains the name of the game for the Fed.” “We’ll first see how strong hiring is this week and whether the labor market can continue to bear higher rates.”

200,000 jobs are expected to have been added during December; this would be down from the 263,000 seen in November. If the decline in job creation is confirmed, markets would welcome this news as they want to see evidence of cooling demand and fewer imminent rate hikes. Instead, a high number would encourage the Fed to raise rates aggressively.

As the ADP private sector jobs report already showed, the US added 235,000 jobs in December, which exceeded expectations of 150,000. The market does not want to see that right now, and the result coincided with the move to the red before the opening.

For now, all eyes are on the Bureau of Labor Statistics and its report on Friday.

Sevens Report’s Tom Essaye wrote: “If [Friday’s jobs report] shows a sharp drop in aggregate jobs, a rise in the employment rate, and a slowdown in wage growth, the market is likely to welcome it. with enthusiasm”