Dow plunges more than 1,000 points as ‘rally’ over Fed plan fades

[Kamaji]

Dow plunges more than 1,000 points as ‘rally’ over Fed plan fades

By Thomas Barrabi
May 5, 2022

US stocks plunged sharply in early trading Thursday as investors grow more anxious about the Federal Reserve’s move to slam the brakes on the economy to combat decades-high inflation.

The Dow Jones Industrial Average plunged more than 1,000 points as of 12:15 p.m., or 3.1%.

The selloff was more pronounced in the tech-heavy Nasdaq index, which was down by 5.23%, or more than 600 points. The broad-based S&P 500 fell about 4%.

The brutal selloff occurred just one day after stocks rallied — with the Dow closing more than 900 points higher as investors cheered the Fed’s announcement of a half-percentage-point interest rate hike. The increase, while larger than normal, matched the market’s expectation.

Stocks turned sharply higher after Fed Chair Jerome Powell indicated the central bank was not considering an interest rate hike of 75 basis points, or 0.75%.

While Powell’s remarks downplaying the likelihood of a larger interest rate hike triggered a “relief rally,” investors “woke up this morning and said, ‘We’re no better off than we were when we woke up yesterday,’” according to Jake Dollarhide, CEO of Longbow Asset Management.

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Source:  https://nypost.com/2022/05/05/dow-falls-1200-points-as-relief-rally-over-fed-plan-fades/

[DefiantMassRINO]

Yesterday was either short covering or a dead cat bounce.

Rising interest change the value proposition calculations for asset classes.

In theory (in a vacuum), rising rates will lead to lower stock prices based upon shrinking price-to-earnings ratios (PE's) and the decling spread between dividend rates and interest rates.

Also, increasing rates leads to rising bond yields and falling bond prices/values.

The trading algorithms and leveraged ETF's are probably amplifying the downward trend.

[catfish1957]

In the distant past rising rates were a good sign for fixed income investors, but in the Biden era, it is meaningless when you have 20% annual inflation.

The idiots in DC have painted themselves in a corner.   The only recourse now for the individual investor is to hold on and brace yourself, and best position yourself for a SHTF scenario

[DefiantMassRINO]

Their plan to fight inflation is to reduce demand by inducing a recession.

The Biden admin's policies are harmful to the supply side, making inflation worse.

If Biden's bad luck continues, the recession could hit right around election time.

[rustynail]

Buy the dip!

[berdie]

In the distant past rising rates were a good sign for fixed income investors, but in the Biden era, it is meaningless when you have 20% annual inflation.

The idiots in DC have painted themselves in a corner.   The only recourse now for the individual investor is to hold on and brace yourself, and best position yourself for a SHTF scenario

It's pi-te-ful...just pi-te-ful.

Although the bulk of mine is in cash (I'm a coward) and bonds (kickin' my fanny right now) The balance is in stocks. Last summer I very nearly rebalanced...but didn't because the market was doing so well. Greedy, greedy berdie. So now you must pay.

[IsailedawayfromFR]

It's pi-te-ful...just pi-te-ful.

Although the bulk of mine is in cash (I'm a coward) and bonds (kickin' my fanny right now) The balance is in stocks. Last summer I very nearly rebalanced...but didn't because the market was doing so well. Greedy, greedy berdie. So now you must pay.

Stocks are quite good in areas of oil, gas and minerals.

I have no complaints as those are complementing my portfolio to balance out the negatives.