Despite the current outlook, a major resiliency play for the US stock market could be in the works over the medium to long term.
Inflation fears are far from over in the US stock market following the release of the Federal Reserve’s preferred inflation gauge called the Personal Consumption Expenditures (PCE) Index. As reported according to CNBC, the core PCE grew 0.4% monthly in January and 4.7% so far this year.
This data irritated the market, as experts fear that this data will give the Federal Reserve the advantage to back off its aggressive monetary push to move forward. The Federal Reserve implemented a 25 basis point increase in interest rates earlier this month as it was counting on the slowest inflation reading using the consumer price index (CPI).
Following the last release, major US stock indices began to see selloffs to extend year-to-date losses. The Dow Jones Industrial Average (INDEXDJX: .DJI) was down 1.34% at 32,710.90. The broader S&P 500 Index (INDEXSP: .INX) also posted a significant drop in value, falling 1.65% to 3,946.28.
The high-tech Nasdaq Composite (INDEXNASDAQ: .IXIC) also turned in the selloffs down 2.08% at 11,349.84. This widespread drop is a reflection of individual companies whose shares plunged the most due to a host of other negative fundamentals.
For example, US multinational aircraft manufacturer Boeing Co (NYSE: BA) saw its shares sell off 4.16% to trade at $199.53 per share. Other major tech giants, including retail giant Amazon.com Inc (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT), also fell more than 2% each.
Wall Street firms have been optimistic that there will be further positive growth this year with favorable interest rates. Banks posted impressive revenue and this likely return to rate hikes may create a high degree of uncertainty about the favorable revenue guidance shared so far.
US Stock Market and the Resiliency Game
Despite the current outlook, a major resiliency play for the US stock market could be in the works over the medium to long term.
“This market has been quite nervous this week, so any disappointing data is going to have a huge impact, as we’re seeing in the early moves,” said B. Riley chief market strategist Art Hogan. “This may test your recent lows, but I don’t think it will push us to new lows. I think it’s just more confirmation that the Fed is probably going to 5% and 5.25%, which is consensus.”
Hogan’s conviction is that this current PCE reading will not necessarily justify a quick return to higher rate hikes unless the next PCI reading shows that inflation is not slowing as expected.
“I don’t think this is enough to say that the 2023 rally is over. I just don’t think that’s the case. I think a lot of this is built into our expectations for monetary policy,” she added.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
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