Market Snapshot: New stock-market lows ahead? What investors need to know as Fed signals rates will be higher for longer.

by | Nov 5, 2022 | Stock Market

Federal Reserve Chairman Jerome Powell sent a clear signal interest rates will move higher and stay there longer than previously anticipated. Investors wonder if that means new lows for the beaten-down stock market lie ahead. “If we don’t see inflation start to come down as the fed-funds rate goes up, then we’re not getting to the point where the market can see the light at the end of the tunnel and start to make a turn,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments. “You don’t normally hit bottom in a bear market until the fed-funds rate is higher than the inflation rate.”

U.S. stocks initially rallied after the Federal Reserve Wednesday approved a fourth consecutive 75 basis point hike, taking the fed-funds rate to a range between 3.75% and 4%, with a statement that investors interpreted as a signal that the central bank would deliver smaller rate increases in the future. However, a more-hawkish-than-expected Powell poured cold water over the half-hour market party, sending stocks sharply lower and Treasury yields and fed funds futures higher. See: What’s next for markets after Fed’s 4th straight jumbo rate hike In a news conference, Powell emphasized that it was “very premature” to think about a pause in raising interest rates and said that the ultimate level of the federal-funds rate would likely be higher than policy makers had expected in September.  The market is now pricing in an over 66% chance of just a half percentage point rate increase at the Fed’s December 14 …

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