US Stock Losses Continue… Sharp Drop Due to “Interest” By Investing.com

US Stock Losses Continue… Sharp Drop Due to “Interest” By Investing.com
US Stock Losses Continue… Sharp Drop Due to “Interest” By Investing.com

© Reuters.

Investing.com – Over the past few days, US markets have witnessed a violent wave of losses on the back of occasional negative data, along with expectations in the fight against high inflation.

The US indices opened with declines, to record strong declines with the start of the session and fail to compensate for its losses, which are exacerbating day after day.

Shares will fall 20% with interest rate hike

Ray Dalio came out with a bleak prediction for stocks and the economy after the hottest inflation rates rocked financial markets around the world last week.

“It looks like prices should go up a lot (toward the higher end of the 4.5% to 6% range),” the billionaire founder of Bridgewater Associates LP wrote in an article.

He added, “This will lead to lower private sector credit growth, which will lead to lower private sector spending, and thus the economy with it. Just increasing prices to about 4.5% will cause stock prices to fall by about 20%.”

The price market indicates that traders have priced in a 75 basis point hike next week by the Federal Reserve, with little chance of a full percentage point move.

Traders expect the fed funds rate to peak at around 4.4% next year, from the current range of 2.25% and 2.5%.

interest expectations

Goldman Sachs (NYSE:) raised its forecast for the Federal Reserve’s funding rate by 75 basis points from the previous two weeks, to a final interest rate of between 4% and 4.25% by the end of 2022.

“The trajectory of higher interest rates, combined with the recent tightening in financial conditions, points to a somewhat worse outlook for growth and employment over the next year,” the bank’s analysts said.

They added: “Our growth forecast is just below the agreed level, and it points to a lower-than-expected growth trajectory that we believe is needed to cool wage and price inflation.”

Although gold is a safe haven currency to hedge against economic problems and inflation, raising interest rates increases the opportunity cost of holding gold, as investors increase their holdings of dollars at the expense of non-yielding gold.

Interest will be up to 5%.

Experts at Rabobank said in a research note that the main event this week will be, and that the US Federal Reserve is likely to raise 0.75% during this meeting to bring rates between 3% and 3.25%.

Analysts at the bank indicated that the US Federal Reserve may raise interest rates to reach 5% levels in light of the strong rise in US inflation and the need to control it during the coming period, and therefore, the interest rate expectations were raised to 75 basis points instead of only 50 basis points during the September meeting. .

In light of these new expectations, the US Federal Reserve will continue to raise interest rates until it reaches 5% in the end, instead of only 4.50%, which was expected earlier, and the main reason for this is the continuation of the spiral of price hikes, which would keep inflation high. .

Economists at Rabobank noted that with the Fed prioritizing inflation over employment now, this will push it to raise interest rates more than expected, and the Fed may reach a peak rate near 5% next year.

A big burden on gold.. but

Luke Alexander, CEO of gold miner Newcore Gold Ltd (TSXV:) came out with the opposite opinion and said, “The Fed rate hike has put downward pressure on the price of gold, but gold will eventually explode.”

Alexander mentioned that with the Fed raising interest rates, the US dollar will continue to do well, which will be a “huge burden on gold”. He added, “When the outlook begins to change, I think that is when we will start to see a strong performance of gold, and it could be a very aggressive move to the upside.”

He also said, “Gold is undervalued, and that’s in terms of the momentum that I’m seeing in the next six months, in terms of inflation starting to come down, as well as some of the tensions that we’re still seeing around the world that, as we all know that gold is active and rising times disasters, which makes the rise of gold inevitable.”

Markets now

US stocks recorded strong losses at the beginning of today’s trading, and opened with strong losses due to the expectations of raising interest rates.

It fell by about 260 points, or about 0.84%, to record 30563 points. The S&P index fell 34 points, or about 0.88%, to 3,839 points.

While it decreased by about 1% to settle at 11,342 points.

US stocks were affected by the release of US inflation data released last week, which strongly boosted the demand for US stocks and weakened the demand for US stocks due to expectations about tightening monetary policy and raising interest rates strongly during the upcoming Fed meeting at the end of this month to control high inflation.

gold now

The US dollar fell during the current moments, down to levels near 1665 dollars an ounce, by 0.6%.

On the other hand, futures contracts for the yellow metal fell during these moments of today’s trading, equivalent to 0.6%, down to levels near 1673 dollars an ounce.

oil now

The US light NYMEX crude fell during these moments of trading, today, Monday, to the levels of 84 dollars per barrel, by 1.1%.

On the other hand, it fell to levels of $90 during these moments of today’s trading.

dollar now

The US maintained its gains after the release of higher-than-expected US inflation data.

The dollar index is now at 109.6, up by 0.16%.

The article is in Arabic

Tags: Stock Losses Continue .. Sharp Drop Due Interest Investing .com

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