Apr 22, 2022 - Economy

Market "madness" as the Fed hints it means business

Javier E. David

Photo illustration of Fed Chairman Jerome Powell casting a shadow on a stock chart — Photo illustration: Sarah Grillo/Axios. Photo: Brendan Smialowski-Pool/Getty Images

Wall Street on Friday suffered its worst day so far this month, as the S&P 500 plunged by over 2%.

Driving the news: In recent days , Federal Reserve officials — including chair Jerome Powell — have made it clear that nothing is off the table when it comes to corralling surging inflation. That intensified a sell-off in both stocks and bonds that drove up interest rates.

On Thursday, Powell suggested that the Fed is likely to raise rates by a half percentage point hike when it meets in May.
In addition, San Francisco Fed's Mary Daly told Yahoo Finance that the economy no longer needs all the liquidity that the central bank has been providing.

Why it matters: Rising rates are having spillover effects on mortgage rates and consumer activity overall. They're also fanning fears of an economic slowdown that may spark a recession.

What they're saying: "Markets are very uneasy about the growing likelihood of a policy error by the Federal Reserve," wrote Jamie Cox, managing partner for Harris Financial Group, in an emailed note.

"When a Fed official suggests a 50 basis points hike, markets immediately start trying to price in 75 basis point hikes. It's madness really," he added.

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Market "madness" as the Fed hints it means business

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