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US stocks fell on Wednesday, before the release of the January FOMC minutes. Apparently, traders are worried over the geopolitical tensions in Ukraine and the persistently rising inflation, which could force the Fed to take more aggressive actions towards monetary policy. Tech companies were the ones that suffered the most, with Meta Platforms dipping as much as 3%. Dollar also declined.
Investors are already estimating the size of the Fed's rate hike in March and plan to cut the balance sheet to a record $8.9 trillion. "If we raise rates really aggressively, we run the risk of slamming the brakes on the economy, putting the economy into recession, which would then -- we'd be crashing back down into this low inflation environment," said Minneapolis Fed President Neel Kashkari.
Markets are already buckling under pressure from high inflation and rising rates, but now it is facing another problem - the risk of the biggest European security crisis in decades. Negotiations are also underway in Ukraine, with US President Joe Biden leading talks with German Chancellor Olaf Scholz ahead of an emergency European leaders' summit on Thursday.
Fortunately, despite seeing the worst performance of the S&P 500 since 2009, investors still poured $152 billion into the market, said JPMorgan. But strategist Nikolaos Panigirtzoglou warns that the upcoming rate hike by the Fed will undoubtedly spur volatility in the market, as it did in 2018.
Other key events for this week are:
- meeting of G-20 finance ministers and central bankers from Thursday to February 18;
- speech of Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard on Thursday,
- US monetary policy forum on Friday.
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