By
Steve Muchoki
April 16th, 2024
The market continues to remain volatile amid the Fed commentary earlier this week. However, US GDP numbers for Q4 2021 are much better than expected.
Strong volatility was once again observed in the US stock market on Thursday, January 27. The blue-chip index Dow Jones (INDEXDJX: .DJI) was up in the early volatile market session. However, it lost all its gains to close at flat levels of 34,160.
Volatile Stock Market
Similarly, the S&P 500 (INDEXSP: .INX) lost all of its early trading gains on Thursday giving a closing at 4326 levels. The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) which was trading in the positive territory early in the day also ended 1.4% in the negative.
The trading volatility came as investors were awaiting an update from the Federal Reserve on the latest GDP report and corporate earnings. The US central bank has already stated that rate hikes are coming by this March. As per market analysts, a total of four rate hikes are possible this year owing to high inflation numbers.
This week has been full of three back-to-back roller coaster sessions in the U.S. equity market. Indexes have witnessed big swings on either side recently. On the weekly charts, all three indexes are trading in the negative zone.
Fed’s Interest Rate Hike
Earlier this week, the Federal Open Market Committee stated that the first interest rate is likely this March. This will be the first-ever rate hike by the Fed in three years since late 2018.
Fed Chairman Jerome Powell stated that there’s “quite a bit of room” to raise rates before avoiding any negative impact on employment. In a note to investors, Tom Essaye, founder of Sevens Report wrote:
“Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to … keep markets volatile”.
On Thursday, the Commerce Department reported that the fourth quarter GDP jumped 6.9% from a year before. This was more than the market expectations. Economists at Dow Jones have expected a 5.5% annualized growth in the last quarter of 2021. Mike Reynolds, vice president of investment strategy at Glenmede, said:
“The Q4 GDP report was a nice upside surprise in a string of recently underwhelming economic data points”.
Tech stocks have faced a brutal sell-off this month. On Thursday, Intel Corporation (NASDAQ: INTC) and Tesla Inc (NASDAQ: TSLA) reported strong quarterly numbers. Despite this, stocks of each were down 7% and 11.9% respectively.
Netflix Inc (NASDAQ: NFLX) was up 7.5% yesterday after Pershing Square Capital purchased 3.1 million shares of the company.