June 29, 2022

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Worries About Monetary Policy Contribute To Sharp Pullback On Wall Street

2 min read

Stocks moved significantly lower over the course of the trading day on Tuesday, offsetting the upward move seen over the two previous sessions. The major averages all moved to the downside, with the tech-heavy Nasdaq posting a particularly steep loss.

Selling pressure intensified in the final hour of trading, dragging the major averages down to new lows for the session. While the Nasdaq plunged 328.39 points or 2.3 percent to 14,204.17, the S&P 500 tumbled 57.52 points or 1.3 percent to 4,525.12 and the Dow slid 280.70 points or 0.8 percent to 34,641.18.

The weakness that emerged on Wall Street reflected renewed concerns about the outlook for monetary policy following comments from Federal Reserve Governor Lael Brainard.

Brainard described inflation as much too high during remarks at a Minneapolis Fed conference and predicted the Fed would start reducing its balance sheet at a “rapid pace” as soon as the May meeting.

“Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery,” Brainard said in prepared remarks.

She added, “The reduction in the balance sheet will contribute to monetary policy tightening over and above the expected increases in the policy rate reflected in market pricing and the Committee’s Summary of Economic Projections.”

The Fed may provide additional clues about the outlook for monetary policy with the release of the minutes of its March meeting on Wednesday.

CME Group’s FedWatch tool is currently indicating a 76.6 percent chance the Fed will raise rates by 50 basis points next month.

In U.S. economic news, the Institute for Supply Management released a report showing U.S. service sector growth reaccelerated in the month of March.

The ISM said its services PMI rose to 58.3 in March from 56.5 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to rebound to 58.0.

The slightly…

2022-04-05 16:11:40

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