Selling the stock market: Market strategist explains investors are ‘shifting focus’

The stock market is on track to fall this week as investors swerve to assess what kind of damage the Federal Reserve has already done to the economy after a series of aggressive interest rate increases to combat inflation.

“We think yesterday was another example of how investors are changing their focus…from what the Fed is going to do…to what the Fed has actually done…and what the significant policy tightening will do in 2023 (now that it’s started). Finally in making a real impact), Matt Maley, chief market strategist at Miller Tabac, explained in a note to a client on Friday.

The financial warning comes after a massive two-day drag in the markets following the Federal Reserve’s interest rate decision on Wednesday.

In the past two days alone, the S&P 500 has lost more than $1.1 trillion in total market cap. The Dow Jones Industrial Average is down about 4% since Wednesday. Apple (AAPL), the market leader, has fallen more than 4% since the middle of the week.

The sell-off accelerated after the Federal Reserve raised interest rates by 50 basis points, bringing the benchmark interest rate to the highest level since 2007. The central bank also surprised market watchers in two other ways.

First, the Fed’s updated economic forecasts showed that officials see rates peaking at 5.1% in 2023. That’s an additional 50 basis points higher than they forecast in September.

Second, Fed Chair Jerome Powell sounded more hawkish on the central bank’s policy path than some expected.

A harsh reading of holiday retail spending for November also didn’t help the increasingly fragile market sentiment.

A trader works on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, December 14, 2022. REUTERS/Andrew Kelly

On Thursday, the retail sales report for November showed a decline of 0.6% from the previous month. Online retailers, general merchandise and clothing stores reported a drop in sales as shoppers backed away from discretionary goods amid rising prices and a slowing economy.

In light of the recent barrage of negative headlines, experts like Mali from Miller Tabak are preparing for a few last days of trading in 2022.

“We thought the market would either surprise people by falling in a big way at the end of the year (as it often does during bear markets)…or it would continue to rally until January of next year before substantively falling again.” “However, it is beginning to look like any surprise will involve the first… rather than the second. Action in the stock market early next week should be when we get a definitive answer.”

Brian Suzy It is a comprehensive editor and Anchor at Yahoo Finance. Follow Suzy on Twitter @employee and on linkedin.

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