The amount of additional tightening priced in for this year increased slightly, with traders seeing lower chances of rate cuts in 2023. Several officials have emphasized the central bank is in no way done, with Kansas City Fed Chief Esther George noting that the destination of the federal funds rate may be higher than markets are currently priced for.įutures contracts referencing the Fed’s September policy meeting showed roughly even odds of a half-point or three-quarter-point hike. The Fed Chief reiterated that another “unusually large” hike could be appropriate next month, though he stopped short of committing to one, adding that the decision will depend on incoming data. “What does this mean for markets? Drastically reduces the chance of a soft landing and the bull case for new highs this year.” “Powell can’t come right out and say that the Fed is fine walking us right into recession in order to crush inflation, but that is what this messaging unequivocally implies,” said Hodge. Syrma SGS Tech, HDFC Bank, Dr Reddy’s, Eicher Motors, IDBI Bank, DFL, Yes Bank stocks in focus on 26 August To Cliff Hodge at Cornerstone Wealth, the Fed is going to remain aggressive at the expense of growth and traders should expect more volatility and tougher conditions for equities. Another reason cited by traders for Friday’s plunge was the concern that restrictive policy will raise the odds of a recession next year. Hawkish Fedspeak grew louder in the last few weeks as financial conditions eased after a stock rally that began with short covering, restored $7 trillion to values - and ironically was linked to dovish expectations. Treasury two-year yields - which are more sensitive to imminent policy moves - rose alongside the dollar. Major equity indexes dipped below their 100-day price averages, indicating the potential for more losses, according to some traders. The rout deepened in afternoon New York trading, with the S&P 500 seeing its worst day since mid-June and the Nasdaq 100 tumbling over 4%. US Stocks tumbled as Jerome Powell gave a clear message that rates will likely stay high for some time, throwing cold water on the idea of a Federal Reserve pivot that could jeopardize its war against inflation.