Investors' fears about the next Fed's action

US stocks fell on Tuesday

Yesterday was the first trading day of the week because the market was closed on Monday for Presidents day.

All three major indexes have registered losses.

The S&P 500 finished at -2.00%, the Nasdaq ended the trading session at -2.50% and the Dow Jones dropped nearly 700 points at -2.06%.

The reasons behind the negative movement are the worries about interest rate increases by the Federal Reserve.

The investors' sentiment remains bullish as indicated in the graph below:

Sentiment indicator - Fear & Greed Index


The market sentiment is 59 in the “Greed” mode, but far less than the data registered one week ago.

Investors' fears about the next Fed's action

The latest economic data in the US have shown a strong economy.

CPI and PPI went up more than expected.

Retail sales rose to the biggest monthly percentage in almost two years.

The labour market remained strong.

Investors are worried that since the economic data are still robust the Federal Reserve will raise interest rates higher and for a longer time than expected.

This scenario could lead to severe economic damage and possibly a recession.

What to watch today

The meeting minutes, of the US central bankers, which happened on January 31 and 1 February, are going to be published today at 19:00 GMT.

During the last meeting, Fed's members voted unanimously to raise the interest rates by 25 basis points but in a recent speech, two Federal Reserve officials (without voting rights) expressed their favour of a 50 basis points rate hike.

Investors are looking forward to see the releasing the FOMC meeting minutes to know about the next Fed's action.

Based on the latest economic data and the hawkish Fed officials' comments, some traders believe that during the next gathering, the US central bankers will increase the rate to 50 basis points in March.

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