Last week has been a wild one for the stock market.
On April 25, the U.S. stock market experienced growth. However, just two days later, the market once again slumped. According to CNBC, stocks fell to a new low for 2022 on April 27.
As the stock market experiences proverbial whiplash, it leaves questions as to what decisions the Federal Reserve will make during its May meeting concerning interest rates. According to the WSJ, the market saw a decline in bond yields on Monday.
This fall led investors, like those at BlackRock, to believe that there may be a chance that an increase in interest rates would not occur as aggressively as initially predicted. The Business Insider quotes Thomas Taw, BlackRock’s Head of APAC iShares Investment Strategy as saying, “We are in a tightening dynamic, we are in a tightening period, but I don’t think it’s going to be as aggressive as what the market is pricing in at the moment, which is very, very aggressive.”
After Wednesday’s drop, it is anyone’s guess what decisions will be made in the Fed’s May meeting. ZeroHedge stated the Fed is in a precarious situation as the yield curve lowers, but trouble remains on the horizon as inflation remains a major factor. These factors leave tough decisions to be made at the Fed’s May meeting.
According to the WSJ, Federal Reserve chairman Jerome Powell signaled last week that he is willing to do what it takes to tighten monetary policy quickly. Brian Price, head of investment management for Commonwealth Financial Network, stated that growth stocks had been punished too severely.
Per WSJ, there are concerns that the Federal Reserve’s aggressive tactics involving interest rates could have a negative impact on the economy and possibly be a catalyst for recession. WSJ shares that analysts say the Fed may implement a short-term spike in interest rates but lower them back down in the long term.
CNBC quoted the chairman and CEO of Aureus Asset Management, Kari Firestone, as saying, “We’re trying to find a place of stability. We need to see a few more names come in with really strong, reliable, and sustainable earnings so investors can get back on board.”
Big-name companies like Apple and Amazon, which make up the FAANG (Facebook, Amazon, Apple, Netflix, Google) market, took a loss after-hours on Thursday. Amazon fell a surprising 10% while Apple showed signs of an upward trend earlier in the day but fell 4% by the closing bell. Netflix experienced a massive loss just last week as stocks fell 72% from their 52-week high. Google’s parent company, Alphabet, fell 3.6%, and Facebook’s Meta fell by 3.3%.
A myriad of factors continues to significantly influence the U.S. stock market. The war in Ukraine, inflation, rising interest rates, and China’s zero COVID-19 policy all weigh against investors. While companies such as Microsoft and Visa are seeing growth, others are falling into dangerous territory.