Federal Reserve Minutes Drag Down US Indices

January 06, 2022 07:30

US stocks fell sharply on Wednesday, after the Federal Reserve released the minutes from their policy meeting in December.

The minutes not only indicated that the Fed could raise interest rates sooner than previously anticipated, but also that they may begin reducing their holdings of Treasury bonds and mortgage-backed securities in a bid to counteract high inflation.

Rising interest rates tend to have a negative impact on stock prices and the market responded accordingly yesterday, with a broad sell-off.

Amongst the biggest casualties of the session were big tech stocks, which fell across the board as follows:

  • Amazon: - 1.89%
  • Apple: - 2.66%
  • Meta Platforms (previously Facebook): - 3.67%
  • Microsoft: - 3.84%
  • Alphabet (Google’s parent company) Class A: - 4.59%
  • Alphabet Class C: - 4.68%
  • Tesla: - 5.35%

Between them, these stocks constitute roughly 25% of the S&P 500 and an incredible 45% of the Nasdaq 100. In other words, when these stocks have a bad day, these two indices are likely to feel it!

And feel it they did.

Yesterday, the S&P 500 fell 1.94%, whilst the Nasdaq 100 experienced its worst day since March 2021, closing down by 3.12%.

Next week, on Tuesday, Fed Chair Jerome Powell will appear before the Senate Banking Committee for a hearing on his nomination to remain as head of the Federal Reserve for a second four-year term. It is likely that he will provide an update on his views about the economy during the hearing, which could give a further indication as to the Fed’s timeline for interest rate hikes.

Depicted: Admirals MetaTrader 5 – Nasdaq 100 Daily Chart. Date Range: 14 May 2021 – 5 January 2022. Date Captured: 5 January 2021. Past performance is not a reliable indicator of future results.

 

Depicted: Admirals MetaTrader 5 – Nasdaq 100 Weekly Chart. Date Range: 19 July 2015 – 5 January 2022. Date Captured: 5 January 2021. Past performance is not a reliable indicator of future results.

 

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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s