The U.S. Stock market plunged last week as the Dow Jones index dropped by 4.58%, the S&P 500 broad market index lost 5.68%, and the Nasdaq 100 index shrunk by 7.55%. The main reason for such declines may be the rise of U.S. Treasuries yield ahead of the Federal Reserve’s (Fed) meeting on January 25-26. The 10-year U.S. Treasuries yields rose to 1.902% on January 19.
Some analysts believe the drop of the high-tech Nasdaq 100 index went far beyond a standard correction as it dropped to 7-month lows and may continue to slide as the nearest strong support level is at 13,000 points, or at the lows of March 2021. The Nasdaq 100 index closed last week at 13,768.90.
“People are really afraid of the Fed rising interest rates and the higher-priced, higher-multiple stocks,” said Kim Forrest, chief investment officer at Bokeh Capital Partners.
After the meeting this week, the Fed may confirm that the first interest rate hike will commence in March. Goldman Sachs and JPMorgan analysts are forecasting that the Fed will raise rates after every meeting this year, which means seven rate hikes. David Mericle, an economist at Goldman Sachs, has said that even as the market is already expecting four quarter-percentage-point hikes this year, the rise in Omicron cases could prompt the Fed to increase the cost of borrowing "at every Federal Open Market Committee (FOMC) meeting until the inflation picture changes". However, the baseline forecast of Goldman is four hikes throughout the year, in March, June, September, and December.
Technically, the fears surrounding interest rate hikes suggest the U.S. stock market may go deeper. The Down Jones and S&P 500 indexes may drop to 33600-33700 points and 4240-4280 points respectively. So, this January may wipe off all the gains from the last eight months.
Some analysts believe the drop of the high-tech Nasdaq 100 index went far beyond a standard correction as it dropped to 7-month lows and may continue to slide as the nearest strong support level is at 13,000 points, or at the lows of March 2021. The Nasdaq 100 index closed last week at 13,768.90.
“People are really afraid of the Fed rising interest rates and the higher-priced, higher-multiple stocks,” said Kim Forrest, chief investment officer at Bokeh Capital Partners.
After the meeting this week, the Fed may confirm that the first interest rate hike will commence in March. Goldman Sachs and JPMorgan analysts are forecasting that the Fed will raise rates after every meeting this year, which means seven rate hikes. David Mericle, an economist at Goldman Sachs, has said that even as the market is already expecting four quarter-percentage-point hikes this year, the rise in Omicron cases could prompt the Fed to increase the cost of borrowing "at every Federal Open Market Committee (FOMC) meeting until the inflation picture changes". However, the baseline forecast of Goldman is four hikes throughout the year, in March, June, September, and December.
Technically, the fears surrounding interest rate hikes suggest the U.S. stock market may go deeper. The Down Jones and S&P 500 indexes may drop to 33600-33700 points and 4240-4280 points respectively. So, this January may wipe off all the gains from the last eight months.
