The inflation data was a relief to traders and experts; the Federal Reserve might tame inflation without causing catastrophic job losses.
Wall Street and global stocks bounced back higher by Friday evening, recording rises in both U.S. and European stocks. However, in the sense of recovery, it isn’t enough since global stocks are heading towards their sixth week of losses.
With strong jobless claims reports and slightly decreased consumer and producer indexes, experts believe in the FED’s ability to tame inflation.
A survey by professional experts found that in light of the market’s recovery and a strong labor market, interest hikes will have minor effects on the labor market in the future.
Taming inflation remains a priority to policymakers, yet fears of aggressive tightening policies seem to affect the global stock healing process.
As of Friday at 3:52 PM, the S&P rose by 88.29 basis points, while the Nasdaq ended higher on Friday with an increase of 384.15 basis points. The Dow Jones industrial average climbed by 1.18% to end at 32,105.34 basis points. On Tuesday, the Nasdaq index fell to its lowest level since 2020, where most of the losses were divided among major stocks, including Amazon, Netflix, and Apple. This week, Apple shares fell by 5.2% while mega-caps fell back by 8%. On a yearly basis, the Nasadq index is down by 25%, with no signs of actual recovery in technology and tech growth stocks.
Economically speaking, technology and tech stocks carry a massive weight on the global and U.S. stock markets. Inflation, rising material costs, and supply shortages will affect future growth and cash flow. Investors fear the possibility of high prices increasing in the future, a sharp decline in supplies, and an actual supply chain crisis.
The Chinese lockdown is putting its weight on growth stocks, including technology and industrial stocks, especially chip supplies. Investors are concerned about the long-term impact of slowing market growth and aggressive Fed interest rate hikes.
Concerns about the global economic outlook are rising, as are concerned about a tightening supply chain.
On the commodity market, aluminum rises on shrinking inventory, putting investors overwhelmed by the current state of global stocks into perspective. Since April and till now, global stocks have ended lower from one closing session to another, heading into the sixth week of losses.
The Fed plans to tame inflation and lower it to 2% by increasing its interest rates aggressively and repeatedly. Yet, these repeated and aggressive hikes will be painful for households and the housing market as well.
The Federal Reserve president says at its conference that taming inflation will not go easy on households and that the participants should expect some pain.
The same things were said by Jay Powell when he says that tightening policy might trigger a recession and extend it to factors outside of the Federal Reserve’s control.
The U.S 30-year yield rose by +5% this year, the highest level since 2009, in times when house sales in the U.S fell sharply. Meanwhile, the recent inflation data was a relief to traders and economists, a relief that raises the hope of taming inflation without creating a labor market crisis, the economist says.
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