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S&P 500 trades sharply lower with bearish prospects

S&P 500 trades sharply lower with bearish prospects

Analysts polled by Bloomberg affirm that the S&P 500 opened the new 2022 year with the worst dynamic over the last 5 years. Comprising stocks of top American companies, the index is viewed as a barometer of the US stock market’s health.

On January 3, the S&P 500 spiked and closed the trading day with a 1.9% slump. Experts consider it to be the sharpest intraday fall recorded since 2016. The Nasdaq also opened the new year on the pessimistic note. The index took a nosedive in the first trading days and lost more than 4% by January 10.

According to Bloomberg experts, the minutes of the recent Fed’s policy meeting prompted investors to sell the stocks included in the S&P 500. At the meeting in December, the rate-setting committee decided to speed up the pace of rate hikes in 2022 to deal with the persistent inflationary pressure. Once the cycle of monetary tightening is underway, the central bank will begin selling assets on its balance sheet. The stocks of high-tech giants such as Tesla, Nvidia, and Alphabet plummeted in response to the Fed’s policy update.

For the time being, market participants assess the likelihood of the first rate hike in January at 88%. Importantly, following the final policy meeting in 2021, the Federal Reserve announced its plans to raise the key interest rate three times throughout 2022. Besides, the regulator decided to scale back its bond purchases by an extra $30 billion per month. This move is necessary to terminate the stimulus program in March 2022.      

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