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US stocks fell last week

US stock

The stock market last week fluctuated strongly in the context of investors worried about the change in policy direction of the US Federal Reserve (Fed).

US stocks closed sharply lower on June 18, with the Dow Jones Industrial Average recording its worst trading week since October 2020.

The stock market last week fluctuated sharply in the context of investors worried about the change in policy direction of the US Federal Reserve (Fed).

Right in the first session of the week (June 14), the two main indexes on the US stock exchange, the S&P composite index and the Nasdaq technology index, closed at their highest levels ever, thanks to a “revival”. ” of technology stocks.

However, the red color spread in the next trading sessions (June 15-16) in the context that the market trades in moderation and avoids making risky investment decisions while waiting for the results of the Committee meeting. Federal Open Market Committee (FOMC) – the Fed’s policy-making body.

Particularly in the session of July 16, US stocks fell to the lowest level of the session right after the Fed announced the adjustment of its forecast for inflation and growth of the world’s largest economy as well as many expectations of interest rate increases. in 2023.

However, US stocks later recovered somewhat after Fed Chairman Jerome Powell’s remarks when he emphasized that the recent increase in inflation was only temporary.

Mr. Powell also affirmed that if there are signs that the inflation path or long-term inflation expectations are increasing significantly and continuously, beyond levels consistent with the set target, the Fed will prepare to adjust monetary policy.

At the end of the two-day meeting, the Fed announced it would keep its accommodative monetary policy as expected, but most officials now believe rates will rise in 2023 rather than 2024.

Some Fed policymakers expect a rate hike as early as 2022.

Wall Street stocks on June 17 continued to record two out of three major indexes falling, as traders still pondered over the results of the latest Fed meeting.

Investors continue to buy shares of tech giants, which have outperformed other sectors during the COVID-19 pandemic, while alienating financial and energy stocks. This development reverses the trend that has taken place for most of 2021 up to now.

The decline continued in the last session of the week (June 18), with the Dow Jones Industrial Average down 1.6% to 33,290.08 points.

The S&P 500 composite index fell 1.3% to close at 4,166.45 points. The Nasdaq technology index also fell 0.9 percent to 14,030.38.

For the whole week, the Dow Jones fell 3.5% – the second consecutive week the index fell and this was also the biggest drop since the week ended October 30, 2020. The Nasdaq and S&P indexes also fell 0.3% and 1.9%, respectively, from the previous week.

The most important takeaway from the meeting is that the Fed is less confident that higher inflation will be temporary, said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Therefore, the Fed could join the group of central banks that tend to tighten monetary policy in the world.

While many markets have hit record highs or multi-year highs in recent months, traders still worry that the era of cheap borrowing costs may be coming to an end.

Uncertainty persists regarding whether the Fed can effectively manage its policy amid inflationary pressures and recovery momentum, said analysts at brokerage Charles Schwab. whether the economy is accelerating or not.

Investor sentiment also fluctuated strongly after the Chairman of the St. Louis Fed’s James Bullard said that the Fed should raise rates as early as the end of 2022.

In an interview on CNBC, Bullard said it was “natural” for the Fed to lean towards a tightening stance at its recent meeting, especially given the recent strong inflation data.

However, he also emphasized the background US economy is recovering strongly after the pandemic. Mr Bullard also said he might support an end to mortgage-backed securities purchases, amid a booming housing market and concerns about a potential “bubble” in the sector. this.

Earlier, in a statement, Fed Chairman Jerome Powell said that as the economy continues to reopen, the change in demand can be large and rapid, and obstacles and difficulties in hiring workers can be difficult. dynamics as well as other constraints may continue to limit the rapid adjustment of supply, making inflation more likely to become higher and more persistent.

Research firm BofA Global Research has forecasted the possibility that the US stock market is entering a period of cyclical correction, in the context of China’s economic slowdown, fiscal stimulus measures. the US lock down gradually and the Fed tends to tighten monetary policy.

Markets will be keeping a close eye on economic data released next week for more “clues” as to how the Fed might adjust monetary policy, if the recent upward trend in inflation continues. maintain.

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