Stock Market 2022: Rate Hike or New Stimulus?￼
09 Feb 2022
Late in the Monday afternoon, U.S. markets plummeted as large tech firms sank again. Investors weighed the prospects for monetary policy ahead of major inflation data later this week, and benchmark Treasury rates were barely moved.
The S&P 500 index fell in the last hour of trade, slipping from session highs. The Nasdaq 100, a tech-heavy index, finished around the day’s low, driven down by Meta Platforms Inc., Microsoft Corp., and Alphabet Inc. drops. Peloton Interactive Inc.’s stock rose on rumors that it is considering a buyout. The Treasury curve widened, albeit movements were muted, and the dollar remained unchanged.
Following a solid U.S. employment report, investors are wrestling with the potential of the sharpest monetary tightening cycle since the 1990s, with markets pricing in more than five quarter-point Federal Reserve interest-rate rises in 2022. The release of the US inflation data this week may increase market volatility. A reading of more than 7% is projected, the highest since the early 1980s.
After European Central Bank Governing Council Member Klaas Knot stated he expected a rate hike as soon as the fourth quarter, Greek debt led to a selloff in European periphery bonds. The European Central Bank (ECB) took a hawkish turn this week, with President Christine Lagarde no longer ruling out a rate rise this year. Lagarde said any changes to monetary policy will be “gradual” in a speech to European Parliament MPs on Monday.
It’s better to expect that there will be a rate hike instead of a stimulus this year. Markets are extremely volatile currently from last few weeks higher P.E. stocks have gown through a bloodbath on street worldwide last week.