Will the Fed Snap Back the Market Yo-Yo a Bit?
Sharp falls in equities may have tightened financial conditions enough to give Powell the space to ease off instant hawkishness.
The Powell Fed would lose credibility if it backtracked on raising rates in March, but predictions of an instant hike are being withdrawn.
Photographer: Brendan Smialowski/AFP/Getty
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Look at them yo-yos, that’s the way you do it, trade the market down and then up on Monday, and then do it all again on Tuesday. It’s almost as if people can make money for nothing. At one point, the U.S. stock market was heading for a perfect repeat, with the S&P 500 dropping 2% before coming all the way back to positive territory by mid-afternoon. By the close, the symmetry had dissipated, as the market took another dive. The intraday volatility remains extreme, and alarming, ahead of Wednesday’s announcements from the Bank of Canada (to which the market ascribes a 70% chance of a rate hike) and the Federal Reserve.