Are you wondering why the stock market is down today? Get the latest news about the stock market and the events that drive stocks, with detailed analysis to help you make informed investment and trading decisions. Recently, Federal Reserve Chairman Jerome Powell said during a Q&A at the University of California at Berkley that he believes the Fed should consider slowing down the pace of what has been a series of 0.75 percentage point rate hikes that markets expect to continue in November. This news has caused traders to increase the odds that only a 50-basis point movement would occur at the December meeting. By noon on Friday, the three leading stock indices were down more than 1.5%, following more overnight losses in Asia and Europe.
The S&P 500 and the Nasdaq Composite are down more than 1.7%, while the Dow Jones Industrial Average (DJIA) is down 1.6%. The probability of a 0.75 percentage point move in December fell to 57.4% after the Wall Street Journal article, compared to 75.4% at the same time on Thursday, according to data from the CME Group. Traders increased the chances of a move by 0.5 percentage points from 24.2% to 39.6%. The stock market had a winning week, as investors considered the possibility of the Federal Reserve slowing down due to sharp interest rate hikes.
Companies are reporting positive results, especially in the banking and technology industries, but social media stocks, including Meta (Facebook's parent company), Alphabet (Google's parent company) and Snap, warned that advertising revenues are lower than expected. Their stock prices fell in response to this news. Existing home sales are already at 10-year lows, with 30-year mortgage rates hovering around 7%, more than doubling the 3% rates at the beginning of the year. Overall consumer payments for rents, mortgages and credit cards also increased, according to a Bank of America report. However, unemployment claims continue to fall, which is a sign that the labor market is still too hot. Two of the Federal Reserve's main mandates are to maintain a low level of unemployment and to keep inflation to a minimum.
It does so through monetary policy, including adjusting the country's money supply so that interest rates move towards the target rate they set. This is because higher interest rates mean higher borrowing costs for businesses and individuals, which should cool demand and reduce price growth. However, raising interest rates too quickly or too high could lead to a short-term economic recession, something the Federal Reserve wants to avoid, but it's a delicate balance to do well. There are still two more Fed meetings this year, one in November and one in December, which investors are eagerly awaiting. For new investors, large market fluctuations can be difficult to manage. There is a lot of uncertainty right now due to rising interest rates, rising real estate prices and rising daily commodity prices due to inflation, and the market reflects this on a daily basis.
But if you have a buying and retaining strategy, remember that slowly investing over time will help you achieve your long-term investment goals regardless of what happens in the short term. It is impossible to time the market and, historically, it has always recovered. Stay on course through descents and peaks, and remember why you're investing. As we enter the last earnings season of the year, companies are already reducing their prospects for the fourth quarter due to rising prices and loan costs. In a few weeks, we'll have election results and more economic reports that will guide us through the rest of the year. Global events affect our stock market and inflation is persistent around the world.
Whatever happens, experts expect a volatile end to 2020.
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