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Wall Street Ends Lower Due to Rate Hike Angst

On Wednesday, all three major indexes of Wall Street were down and closed the same way, as investors were certain that nothing would deter the Federal Reserve from hiking up interest rates. They did not believe that the latest economic data could sway the Fed, which has been pushing up rates rather aggressively in a move to control the massive inflation. According to the data, April saw the job openings in the US decline, but they were still at high levels. This indicated that the increase in wages was contributing to the rise in inflation because companies were scrambling for employees.

Furthermore, May saw the manufacturing activity in the US increase faster than expected, due to strong demand of goods. This helped in eradicating concerns about a potential recession. Investors were not only keeping an eye on data, but were also checking the public comments made by a number of officials of the Federal Reserve on Wednesday. A report from the Fed indicated that there was only a modest expansion in the economy from late April to the middle of May in some regions of the US. This meant that the efforts of the Fed for cooling the demand in the markets were bearing fruit.

However, market experts said that they there would still be rough trading until inflation is tamed enough that investors are able to make a realistic bet on a slowdown in interest rate hikes. Strategists said that rate hikes would not be paused until there is a significant decline in inflation numbers. Now, the attention has shifted towards the report that is due on Friday about jobs in May as well as next week’s report on inflation readings. Economic data has been closely monitored by investors because they are seeking clues about the Fed’s decision for interest rates.

After the economic data was disclosed, most strategists stated that they hadn’t showed any such data that could convince the Fed to slow down their aggressive campaign of increasing interest rates. Mary Daly, the President of the San Francisco Fed, said on Wednesday that the next few meetings could bring about a hike in interest rate of about half a point. This was because the central bank was trying to tame the high inflation and were aiming to increase the rates to 2.5%. This was similar to what Christopher Waller, the Governor of the Federal Reserve, had said on Monday.

JP Morgan Chase &Co’sCEO, Jamie Dimonsaid that the US economy’s problems were not very different from a ‘hurricane’ and said that forceful action was needed from the Fed to ensure that the US economy does not plunge into a recession. There was a 0.54% decline in the Dow Jones Industrial Average, a 0.75% decline in the S&P 500 index, while the Nasdaq Composite fell by 0.72%. Energy was the only industry amongst the 11 of the S&P 500 that gained, as oil prices saw an increase of 1.8%. Healthcare and financials were the biggest losers.

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