Stocks have been seesawing since August on uncertainty whether the Fed Reserve Banking System has been done with their drastic heights to interest rates.
US stocks drifted in a quiet trading Monday, as Wall Street made a few big moves ahead of the Fed Reserve Banking System’s next meeting on interest rates.
According to Detroit News, higher rates have helped cool inflation from the peak last summer, however, it is also hurting prices for stocks and other investments while slowing the economy. Traders universally almost expect the Fed Reserve Banking System to keep rates steady at its meeting this week. More attention will be on the forecasts that the Fed Reserve Banking System officials will release about where they expect interest rates, the economy, and job market to head in the coming years.
The first thing that the market will focus on is how high the Fed Reserve Banking System officials see its main interest rates rise this year. Traders have been betting on 40% chance of the Fed Reserve Banking System will raise rates again in November or December, according to the data from CME Group.
However, just as much attention will be on what the Fed Reserve Banking System officials will say about next year, investors expect the Fed Reserve Banking System to begin cutting rates. They crave cuts, which typically loosen on financial conditions and give boosts to financial markets.
There are fears that the rates may have to stay higher for longer in order to get the inflation to go down to the Fed Reserve Banking System’s target of 2%.
The rise on oil prices, along with the worry of rates staying high for longer, have helped pushed us Treasury yield across the bond market. Worries about a possible recession also continue to hang around even though they have been diminished with successive reports showing that the economy and job market continue to hum.
The 10 year Treasury yield edged down to a 4.32% from a 4.33% last Friday. The two year Treasury yield, which closely follows the expectations for the Fed Reserve Banking System, held steady at 5.04%.
One worrying factor is where bond yields are at, with two year and other shorter term yields have continued to rise higher than longer yield terms. That is an unusual occurrence that has often preceded recessions from the past. Another warning is coming from the leading economic indicators index which looks at new orders for manufacturers, consumer expectations for business conditions, and other factors that might show where the economy is heading to.