June 27, 2022

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U.S. Stocks See Further Downside Amid Worries About Monetary Policy

2 min read

Stocks moved mostly lower during trading on Wednesday, extending the significant downward move seen in the previous session. The major averages all moved to the downside, with the tech-heavy Nasdaq showing another particularly steep drop.

After tumbling by 2.3 percent during trading on Tuesday, the Nasdaq plunged 315.35 points or 2.2 percent to 13,888.82. The S&P 500 also slumped 43.97 points or 1 percent to 4,481.15, while the narrower Dow posted a more modest loss, falling 144.67 points or 0.4 percent to 34,496.51.

Worries about the outlook for monetary policy continued to weigh on Wall Street amid concerns the Federal Reserve plans to tighten monetary policy more aggressively than previously anticipated.

Fed Governor Lael Brainard’s comments from Tuesday continued to generate selling pressure, as she predicted the Fed would start reducing its balance sheet at a “rapid pace” as soon as the May meeting.

Philadelphia Fed President Patrick Harker also weighed in on the outlook for monetary policy in remarks to the Delaware State Chamber of Commerce.

Harker said he is “acutely concerned” about the elevated rate of inflation and forecast a series of “deliberate, methodical” interest rate hikes this year.

Stocks fluctuated late in the session after the Fed released the minutes of its March meeting, which showed that the meeting featured a continued discussion about reducing the size of the central bank’s balance sheet.

Staff presented a range of possible options for reducing the Fed’s securities holdings over time in a predictable manner, with all of the options featuring a more rapid pace of balance sheet runoff than in 2017-2019.

The Fed said participants generally agreed reducing the central bank’s holdings by about $95 billion per month would likely be appropriate, reflecting monthly caps of about $60 billion for Treasury securities and about $35 billion for agency mortgage-backed securities.

The minutes showed that there was also general agreement that the caps could…

2022-04-06 16:15:07

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