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Friday, January 27, 2023

Interest Rate Fears Spur Losses in Resistance

  • US stocks closed lower on Tuesday as investors cast doubt on the Fed’s easing of rate hikes.
  • A strong jobs report for November and strong GDP data suggest that a resilient economy may cause the Fed to raise rates for longer.
  • The S&P 500 extended its two-day slide to more than 3% as its 200-day moving average remains a major resistance level.

US stocks moved decidedly lower throughout the day on Tuesday, as investors continue to question whether the upcoming Federal Reserve rate hikes will really ease on the resilient economic data.

The Fed is widely expected to raise interest rates by 50 basis points at its FOMC meeting next week, one step below its four consecutive 75 basis point interest rate hikes. Another 50 basis point hike is expected at its February FOMC meeting, according to the CME’s FedWatch tool.

Last week’s strong November jobs report and continued strength in quarterly GDP data show the economy is holding up well despite the Fed’s nearly 400 basis point rate hikes so far. of the year. The GDPNow forecast from the Federal Reserve Bank of Atlanta calls for GDP growth of 2.8% in the fourth quarter.

And while inflation is showing signs of slowing, any unexpected acceleration in prices could prompt a more hawkish Fed to stick with its tightening. The S&P 500 is down more than 3% since Friday, after testing its lower 200-day moving average for resistance.

Here’s where the US indices were at at the close of 4:00 pm ET on Tuesday:

This is what else happened today:

In commodities, bonds and cryptocurrencies:

  • West Texas Intermediate crude oil fell 3.37% to $74.34 a barrel. Brent crude, the international benchmark for oil, fell 3.81% to $79.53.
  • Gold rose 0.12% to $1,783.50 an ounce.
  • The 10-year Treasury yield fell six basis points to 3.53%.
  • Bitcoin fell 0.11% to $16,986, while ether fell 0.71% to $1,253.

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