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As it stands, the Federal Reserve may add another 50 basis points to the interest rate this month or next.
Stock futures are beginning to rebound as of the early hours of the 6th of June with hopes that the Federal Reserve will fix monetary policy. The highs came after a losing week which saw major averages plunge significantly. During the disappointing week, the Dow dropped 0.9% for the ninth negative week in 10, and the Nasdaq Composite declined 1%. S&P 500 also lost 1.2%. Specifically, the Dow Jones Industrial Average (DJIA) stock futures increased 132 points or 0.4%. Meanwhile S&P 500 futures gained 0.57% and Nasdaq 100 futures pumped 0.77%.
While stock futures were down last week, investors amassed huge losses in the wake of the Federal Reserve hike. At the same time, there are fears that the central banks could up interest rates too much and too fast, which has led to a recession. After the initial interest rate hike, the Federal Reserve officials said there may be similar hikes soon, and this has been affecting stock futures. The policymakers stressed the need to combat the ongoing inflation by raising interest rates quickly. They added that the interest rate would increase more than the market’s anticipation.
“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” said the minutes of the group.
Additionally, members of the Federal Open Market Committee stated that “a restrictive policy stance may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”
Stock Futures Went Higher as Investors Bet That Federal Reserve Will Fix Monetary Policy
As it stands, the Federal Reserve may add another 50 basis points to the interest rate this month or next. In further efforts to address inflation, the US economy added 390,00 jobs in May, crossing over the 328,000 estimated by Dow Jones. Although the unemployment rate is about 3.6%, many investors believe that it is a way for the Fed to remain aggressive.
The chief equity strategist at LPL Financial, Quincy Krosby, noted:
“For now, the market sees a Federal Reserve trying to navigate a painful and bumpy road, yet trying to find a soft exit. And the market finds itself between wanting to believe in the rallies but not believing that the Fed can negotiate a soft landing.”
Investors anticipate the consumer price index reading for May, which is slated for release on Friday morning. The head of portfolio management at Commonwealth Financial Network, Peter Essele, commented:
“The second half of 2022 is going to be a roller coaster ride for investors unless the Fed is able to bring inflation under control without a hard landing. Most investors seem to be wagering on a cash-and-burn scenario at this point as recessionary fears abound, and equity markets fail to develop any sort of positive momentum.”
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