The stock market witnessed a massive fall from last Friday up to the present due to the hawkish stance maintained by Fed Chair Jerome Powell during his speech on Friday at the Jackson Hole Symposium. The Fed will continue with a series of aggressive interest rate hikes as an effective tool for fighting inflation till the inflation rate is contained.
During the economic summit last week, Powell revealed that the FOMC would never relent in their efforts towards containing rising inflation and would proceed with higher interest rate hikes not seen before since the committee started hiking the interest rate during their next session in September. However, he maintained that the committee would first observe the data and general economic outlook before proceeding with such decisions.
He acknowledged that hiking the interest rate would cause more hardships for US citizens but insisted that not controlling the inflation rate at this point would even cause more difficulties for the citizens in the long term.
The prospect of a higher interest rate hike for the US dollar during the next Fed meeting in September pushed the stock market into a risk-aversion mode, resulting in a massive sell-off for stocks from last Friday to the start of the new week.
US stocks, Japanese stocks, Hong Kong Stocks, French stocks, German stocks, and ETFs have been on a strong downward trend since last Friday.
Major US stocks such as Apple Inc., Alibaba Group Holding Limited, eBay Inc., Facebook, Walt Disney Company, Google Alphabet Inc., etc., have lost significant value from last year.
German stocks such as Adidas AG, Allianz AG, Fresenius Medical Care, Siemens AG, and Infineon Technologies AG are equally down during the Asian session today.
French stocks such as Airbus Group, Air Liquide SA, Hermes International, Total Energies, AXA SA, Michelin SCA, etc., are currently down also.
#AAPL is down by 3.77%, priced at $163.52.
#TSLA is currently down by 3.77%, priced at $288.09.
Airbnb, Inc. (#ABNB) is down by 1.2%, priced at $112.90.
Adobe Systems Inc. (#ADBE) is down by 1.5%, priced at $112.90.
AMC Entertainment Holdings (#AMC) is down by 2.3%, priced at $9.16.
#AMZN is down by 2.3%, priced at $130.86.
The massive fall in stock prices has affected the US and Japanese index performance in the market today. Major US indexes such as the NAS100, SPX500, and US30 are all in a definite downward trend.
Japanese indices such as JP225 were down by over 2.5% during the Asian session.
Investors are eagerly awaiting the outcome of the NFP report this week to determine the rate of the interest rate hike to expect in September during the next Fed session and to show the next direction for the stock market at large.
How does an aggressive interest rate hike affect the stock market?
Hiding the interest rate for the US dollar often pushed investors to withdraw from risky assets, including stocks, gold, and cryptocurrencies, to invest in bonds and the US dollar as a safe haven.
The present hawkish stance from the Fed Chair last week that the FOMC will be continuing with more aggressive interest rate hikes will rather discourage significant investments into the stock markets.
The Fed’s September session outcome will determine the long-term trend for the stock market in the coming months.
However, the primary factor driving the stock market this week will be the outcome of the NFP report on Friday. Analysts are hopeful that a high increase in the unemployment rate from the NFP this week might push the Fed to slow down its aggressive interest rate hike. In contrast, a reduced unemployment rate will cause the Fed to proceed with a more aggressive interest rate hike.