The Federal Reserve raised interest rates by 50 basis points as scheduled, but U. S. stocks fell more than expected.

The Dow had its best one-day performance and biggest one-day decline since 2020 this week, with the Nasdaq weekly line five consecutive overcast, the longest weekly decline since 2012, and the S & P 500's fourth worst performance in the opening year, second only to the market crashes of the 1930s and 1970s.

Concerns about Fed policy, coupled with the rapid rise in Treasury yields, have hit technology and growth stocks particularly hard, as investors reassess previously high sectors.

As of this weekMore than half of the stocks in the NASDAQ have halved from their 20-year high.That is, it fell by more than 50%, and the NASDAQ was the first of the three major indexes of US stocks to enter a technical bear market.

The s & p 500 is down more than 12% year-to-date, but has not officially entered a bear market. But some strategists and observers say the S & P 500 is pulling back as it did during a bear market. Wall Street banks such as Morgan Stanley have been saying that the US stock market is close to entering a bear market.

If the S & P 500 officially enters a bear market, Bank of America Corporation strategist Michael Hartnett (Michael Hartnett) has calculated how long this "pain" will last. They studied the history of 19 bear markets over the past 140 years and found that the average price fell by 37.3%, with an average duration of about 289 days.

Strong non-agriculture

One of the reasons for the volatility of the market is:Investors lack an obvious safe haven as bonds and gold are under pressure from rising interest rates.

Employment in the United States rose by 428000 in April, more than expected. The market had expected that non-farm payrolls would increase by 400000. The unemployment rate was 3.6 per cent, slightly higher than the expected 3.5 per cent. The futures of the three major US stock indexes rose after the data were released, indicating that market expectations for more aggressive policy tightening by the Federal Reserve have cooled.

A weak link in the employment report is the labour force participation rate, which has not changed much from the previous month and is still 1.2 percentage points lower than the pre-epidemic level.Economists believe that a rebound in participation could help curb wage rises, which in turn restrain inflation.

But Amy Kong, chief investment officer of Barrett Asset Management (Barrett Asset Management), saidA strong jobs report may also mean that the Fed has a little more room for aggressive action. "

Stocks have fluctuated sharply in recent days as investors try to determine how the Fed's plan will affect the economy. Investors are caught between two different hopes: raising interest rates big enough to curb rapidly rising inflation and not big enough to undermine economic growth.

Altaf Cassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Investment Management (State Street Global Advisors), said: "the market is trying to weigh whether central banks are more worried about inflation or whether they are more worried about restrained economic growth. The market has clearly decided that central banks are more worried about inflation. "

"the widely expected recovery in the stock and bond markets is short-lived because the Fed's position on Wednesday was not as tough as expected," Barclays strategist Emmanuel Cau said in a note to clients. While there may not be a big 75 basis point rate hike in the future, in our view, the policy tightening cycle implied in the future is still very tough. Unless soaring inflation reverses quickly, central banks may have no choice but to slow growth to slow inflation and maintain credibility. "

Investment bank feels the pulse.

After the worst April since 1970, Mike Wilson, chief US equity strategist for Morgan Stanley's bearish market, also predicted on MondayThe S & P 500 will face more selling, possibly falling to 3400.

We think the S & P will decline to at least 3800 in the short term, and if earnings per share start to decline over the next 12 months because of profit margins and / or recession concerns, it could be as low as 3460, the 200-week moving average.

Ian Lyngen, head of US interest rate strategy at BMO Capital Markets of Canada, also said that US Treasury yields soared as the stock market fell.It shows that bond markets no longer believe that the Fed can bring the economy to a soft landing while continuing to tighten policy to fight inflation.

Market participants are giving up hope of a soft landing. It is actually saying that policy will be overtightened. The question now is when we will really see a recession, and then when the Fed will need to fine-tune interest rates after normalizing policy rates to a certain extent.

Bank of America Corporation's chief strategy Michael Hartnett predictionsThe bear market in U. S. stocks will end at 3000 o'clock in October this year.The legendary Wall Street would-be analyst and his team looked at the history of 19 bear markets over the past 140 years and found that the average price during the bear market fell 37.3%, with an average duration of about 289 days.

According to the Bank of America report, many stocks have reached a bear market. For example, 49% of NASDAQ stocks are more than 50% below their 52-week high, while 58% of NASDAQ stocks are down more than 37.3%.

Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald, said: there are a lot of uncertainties in the current economic situation, including inflation, oil prices and global macroeconomic events. I think,There may be some fluctuations in the future, which may last for a whole year.