Fallen stocks like Carvana and Bed Bath & Beyond are getting a huge boost as risk appetite returns amid the Fed’s recognition of declining inflation.

  • Risk sentiment returned to the stock market on Thursday after the Fed acknowledged falling inflation.
  • Fed Chairman Jerome Powell mentioned the word “disinflation” 13 times during the FOMC speech on Wednesday.
  • Fallen stocks like Carvana and Bed Bath & Beyond surged as interest rates fell in Thursday sessions.

Risk appetite returned to the stock market on Thursday after Federal Reserve Chairman Jerome Powell acknowledged that inflation is falling.

Stocks of high-risk companies such as Carvana and Bed Bath & Beyond, whose future is in doubt due to possible bankruptcy, rose more than 20% on Thursday.

Powell said the word “disinflation” 13 times during his FOMC press conference, a significant change from previous meetings. This recognition helped to provoke a cut in interest rates, despite the fact that the Fed raised the effective federal funds rate by 25 basis points and signaled the likelihood of further rate hikes.

But the market is not so sure that it believes that the Fed will continue to raise interest rates. While the CME Fed WatchTool suggests a 25 basis point rate hike in March, likely before a pause in rate hikes, Morgan Stanley believes Wednesday’s rate hike was the last of the cycle.

“The disinflationary process continues and, coupled with a weaker labor market, we believe that the incoming data and the revision of forecasts for the March SEP will cause the Fed to pause at its next meeting,” Morgan Stanley said in a note on Wednesday.

And some investors, such as Wharton professor Jeremy Siegel, believe the Fed will cut interest rates by the end of the year due to falling inflation, a mild recession and potential job growth cuts.

“I do think we will have a significant rate cut in the second half of the year due to the weakening economy and the sharp slowdown in inflation,” Siegel said in an interview with CNBC on Thursday.

The 10-year US Treasury yield fell 6 basis points on Thursday to 3.37%, its lowest level since September.

Falling interest rates helped fuel a significant rise in depreciated stocks on Thursday, with the tech sector leading the way. Big-cap tech stocks like Amazon, Alphabet and Tesla, which have fallen more than 30% in 2022, are up 6% in Thursday trading.

Whether the risk environment lasts will depend on future inflation performance, the labor market, and whether the Fed continues hawkish moves to raise interest rates and shrink its balance sheet.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button