These concerns are compounded by the lack of data on the market and unexpected news from China and Russia, adding uncertainty to the year's final week.
As investors consider the implications of Russia's oil ban and China's reopening, the market is leaning towards a defensive posture. Wednesday also saw a significant decline in pending home sales, which fell 4% MoM, far exceeding expectations.
The uncertain economic outlook is causing difficulties for the Federal Reserve as they need help to navigate the lagged effects of their policies on Corporate America. These effects are expected to be even weaker in early 2023.
Yields on US 10-Year Treasuries are continuing to rise, reaching 3.88%. There are several reasons traders expect the Fed to implement rate cuts in the second half of 2023, including the unlikelihood of inflation returning to a sustainable 2% shortly, a precondition for the Fed to consider changing its monetary policy.
Oil prices are also down, reflecting the overall uncertainty in the market regarding the possibility of a recession and the Fed's policy outlook. The reduced Russian supply and increased demand from China's reopening should be positive for oil prices.
Inflation and Monetary Policy Concerns Loom Large
Inflation and monetary policy concerns are major factors contributing to Wednesday's downturn in the US stock market. These concerns are exacerbated by the lack of data and unexpected geopolitical risks from China and Russia.
The Federal Reserve needs help to address the lagged effects of its policies on Corporate America, which are expected to weaken even further in early 2023. This uncertainty is leaving the Fed needing help with how to proceed.
Yields on US 10-Year Treasuries are increasing, reaching 3.88%, and traders are anticipating the possibility of rate cuts in the second half of 2023. However, the likelihood of inflation returning to a sustainable 2% in the near future is low, a precondition for the Fed to consider changing its monetary policy.
Oil prices are also down, potentially reflecting the overall uncertainty in the market regarding the possibility of a recession and the Fed's policy outlook. The reduced Russian supply and increased demand from China's reopening should be positive for oil prices.
Pending Home Sales See Sharp Decline
Pending home sales in the US saw a significant decline on Wednesday, falling 4% MoM, far exceeding expectations. This adds to the concerns about the state of the economy and the impact of Fed policies on Corporate America.
The Federal Reserve is struggling to address the lagged effects of its policies, which are expected to weaken even further in early 2023. This uncertainty is leaving the Fed unsure of how to proceed.
Yields on US 10-Year Treasuries are increasing, reaching 3.88%, and traders are anticipating the possibility of rate cuts in the second half of 2023. However, the likelihood of inflation returning to a sustainable 2% in the near future is low, a precondition for the Fed to consider changing its monetary policy.
China's reopening should be positive for oil prices.
The US stock market is experiencing a downturn on Wednesday due to thin liquidity, inflation and monetary policy concerns, and geopolitical risks. These concerns are compounded by the lack of data on the market and unexpected news from China and Russia, adding uncertainty to the year's final week.
As investors consider the implications of Russia's oil ban and China's reopening, the market is leaning towards a defensive posture. Wednesday also saw a significant decline in pending home sales, which fell 4% MoM, far exceeding expectations.
Geopolitical Risks Affect US Stock Market and Economic Outlook
The uncertain economic outlook is causing difficulties for the Federal Reserve as they struggle to navigate the lagged effects of their policies on Corporate America. These effects are expected to be weaker in early 2023, leaving the Fed fumbling in the dark.
Yields on US 10-Year Treasuries are continuing to rise, reaching 3.88%. There are several reasons for traders to expect the Fed to implement rate cuts in the second half of 2023, including the unlikelihood of inflation returning to a sustainable 2% in the near future, a precondition for the Fed to consider changing their monetary policy.
Oil prices are also down, potentially reflecting the overall uncertainty in the market regarding the possibility of a recession and the Fed's policy outlook. The reduced Russian supply and increased demand from China's reopening should be positive for oil prices.
