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Stocks in the US fell in turbulent trade as the Federal Reserve announced a $95 billion monthly balance sheet reduction
In a bumpy trading day on Wednesday, US equities sank after minutes from the Federal Reserve’s most recent meeting revealed intentions to decrease its balance sheet by $95 billion each month. A total of $60 billion in Treasuries and $35 billion in mortgage-backed securities would be rolled off each month. The Fed hinted that a three-month phased approach to reducing its balance sheet may begin at its May meeting. The Fed also signalled that it will likely raise interest rates by 0.50 percent at its May meeting, in addition to beginning to reduce its balance sheet later this spring.
The Federal Reserve’s balance sheet is now at $9 trillion, up from $4 trillion just before the COVID-19 epidemic began. Some experts questioned how far the balance sheet reduction could be taken. “To fully sell all of their interests, it might take more than 5 years (and possibly as long as 8 years). Before that happens, there’s a good chance we’ll have a recession, which would force them to add to their balance sheet again, so market distortions are likely to endure a long time “Chris Zaccarelli, CIO of the Independent Advisor Alliance, stated.
Nonetheless, on Wednesday, the 10-year US Treasury yield rose 5 basis points to 2.60 percent, its highest level since 2019. Higher mortgage rates have resulted from the steady rise in interest rates, which surpassed 5% for the first time in years on Tuesday. Mortgage applications have dropped by 40% year over year as a result of this. Former Federal Reserve Chairman Bill Dudley has stated that the Federal Reserve will have to inflict pain on the stock market in order to keep inflation under control. “Investors should pay more heed to Powell’s comments: financial conditions must tighten,” he added.
The United States has imposed further sanctions against Russia, despite Vladimir Putin’s refusal to halt his war in Ukraine. All new investments in Russia were barred under the new measures, which also increased penalties against Russian financial institutions and state-owned firms. Russia said on Wednesday that it has sent $650 million in ruble bond payments on dollar bonds. The decision comes after the US Treasury barred Russia from paying its dollar debt with American bank accounts.
Michael Burry renewed his Twitter account and expressed his support for Elon Musk’s purchase of more than 9% of Twitter. In a now-deleted tweet, Burry remarked, “Of course @elonmusk buying enough shares to dominate Twitter would be good for America.” “Period.”
Because of rising oil costs and relentless Fed tightening, billionaire investor Leon Cooperman believes the US will face recession in 2023. He told to reputed news agency on Tuesday, “I think the Fed has completely missed it, and I think we have a lot of timber to chop.”
The US economy will also suffer a recession in 2023, according to Deutsche Bank, as the Fed hikes interest rates swiftly. It was the first big bank to anticipate a US recession, claiming that one is required to keep inflation in check.
The price of West Texas Intermediate crude oil decreased 4.79 percent to $97.08 per barrel. Brent crude, the worldwide benchmark for oil, dropped as much as 4.34 percent to $101.96 a barrel. Bitcoin dropped 3.38 percent to $43,667 dollars. The price of ether dropped 3.79 percent to $3,217. The price of gold declined 0.15 percent to $1,930.30 per ounce.
