Is the Federal Reserve now in the business of talking down stock prices whenever investors get too optimistic about interest rates?
It sure looked like it today.
Today, Wednesday, November 15, New York Fed President John Williams ended the day’s rally when he said the central bank should avoid incorporating financial stability risks into its considerations as it raises interest rates. San Francisco Fed President Mary Daly, in addition, emphasized that a pause is “off the table.” And Fed Governor Christopher Waller said the size of the next rate hike will depend on incoming data. He did add that he’s comfortable with the idea of moderating the pace of increases.
That was enough to end stocks lower with the Standard & Poor’s 500 ending the day down 0.78% and the Dpw Jones Industrial Average off 0.02%. The NASDAQ Composite finished down 1.54% and the small-cap Russell 2000 ended off 1.89%.
The decline put the S&P 500 below the 200-day moving average again and close to the 50-day moving average at 3960.
During the day Goldman Sachs said it now expects the Federal Reserve to boost its benchmark interest rate to a range of 5% to 5.25%. That’s up from Goldman’s previous projection of 4.75% to 5%.
Back in the good ol’ days, the expectation among investors was that they could count on the Fed to stabilize stock prices if they threatened to tumble. Currently, it seems the Fed sees its job as preventing the stock market from getting too optimistic about a pivot away from the bank’s cycle of interest rate increases.