Wall Street: Fear factor: Bruised Wall Street faces a gauntlet of worries

New York: Battered U.S. stocks face a potentially painful period in the weeks ahead as hawkish Federal Reserve policy, rising bond yields, geopolitical uncertainty and corporate earnings season fuel unease investors. After last week’s sharp decline, the S&P is down 5.7% so far in April and is on track for its worst monthly decline since March 2020, when the spread of the Covid-19 pandemic took hold. blow up stocks.

A measure of investor anxiety, the Cboe Volatility Index, known as Wall Street’s fear gauge, posted its biggest one-day gain in about five months on Friday to close at a five-week high. of 28.21.

“More variables in any equation create greater uncertainty in the outcome,” said Michael Farr, president of Farr, Miller & Washington. “We have more variables now than I remember in my career.”

The main worry among market participants is a Fed that has repeatedly stepped up its hawkish rhetoric as it prepares to battle the worst US inflation in nearly 40 years.

The hawkish stance was underscored on Thursday, when Fed Chairman Jerome Powell said a half-point interest rate hike “will be on the table” at the Fed’s monetary policy meeting. central bank next month.

Eurodollar futures traders estimated on Friday that the Federal Reserve’s rate hike cycle would peak higher than expected, adding to concerns that the extent of Fed tightening could affect U.S. growth. .

Rising Treasury yields added pressure on stocks and other risky assets. Real yields – which take into account projected inflation – moved into positive territory last week for the first time since March 2020, dampening the attractiveness of equities relative to risk-free US government bonds.

Many investors believe that the economy – and the markets – can remain resilient. Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management, said the US economy is robust enough to grow even if Fed hikes match current expectations. Reuters