- U.S. stocks fell on Thursday as investors digest interest rate hikes from central banks around the world.
- The US Fed raised interest rates by 75 basis points on Wednesday in a bid to contain rising inflation.
- Central banks in England, Switzerland, Taiwan and Brazil all raised interest rates this week.
U.S. stocks fell on Thursday, giving up most of their gains seen on Wednesday after the
as investors digest further interest rate hikes by central banks around the world.
The Fed hiked interest rates 75 basis points on Wednesday, the biggest interest rate hike since 1994, as Fed Chairman Jerome Powell reiterated that his main objective was to bring the rise under control inflation while avoiding an economic crisis.
May’s CPI Inflation Report showed that inflation is currently at 40-year highs, mainly due to a surge in oil prices.
But it’s not just the Fed that is raising interest rates in an attempt to reduce inflation. So far this week, central banks in England, Switzerland, Taiwan and Brazil have all raised interest rates. Soaring interest rates have caused equity valuations to plummet, as higher rates increase the cost of capital for businesses and increase the discount rate used in equity valuation models.
Here’s where the U.S. indices were shortly after the 9:30 a.m. ET open on Thursday:
Wells Fargo analysts believe it is increasingly difficult for the Fed to pull off a soft landing, and instead an economic recession will materialize in 2023.
“In our view, the recession will be more or less equivalent in magnitude and duration to the recession of 1990-91. This recession lasted two quarters with a decline in real GDP of 1.4,” Wells Fargo said in a note. to customers.
The Fed’s interest rate hike hasn’t helped the prices of cryptocurrencies like bitcoin and ether, which continue to trade at levels not seen since the end of 2020. Billionaire investor Jeff Gundlach believes there is more pain ahead for bitcoin, arguing that the cryptocurrency could plunge another 50% to $10,000.
Russia could be on the verge of defaulting on its debt for the first time in a hundred years. Russia faces about $100 million in debt payments with a grace period ending June 26. The United States allowed a payment exemption to expire in May, which made it difficult for Moscow to pay American holders of Russian debt.
West Texas Intermediate crude oil fell 0.61% to $114.61 a barrel. Brent, the international oil benchmark, fell 0.51% to $117.70.
Bitcoin fell 4.59% to $21,168. Ether prices fell 7.81% to $1,116.
Gold jumped 0.54% to $1,829.50 an ounce. The 10-year Treasury yield rose 15 basis points to 3.44%.