Stock Market Plunge Questions Fed Rate Hike Schedule

building icon of FED over US flag and market data

As the stock market plummeted on Monday, the schedule of the Federal Reserve raising interest rates was put under inquiry.

Mere weeks following the market’s acceptance of the Fed’s three quarter-point rate hikes, the day’s trading changed sentiment.

Traders on the fed funds futures market are now implying that there’s less than 50 percent chance that the central bank will be able to move three times in 2018.

The move came the same day when the Dow Industrials experienced their biggest intraday drop ever. Dow saw a staggering 1,500 point plunge as worries over rising interest rates continues to grow.

“If this market’s going to behave like that that’s going to put into question three to four hikes this year,” said senior strategist Ilya Feygin.

Traders are still sure about the March rate hikes. They assigned a 71.9 percent chance that the Federal Open Market Committee will move during its next meeting.

They are, however, less certain about June with the prospect falling to 50.3 percent from almost 60 the day before. September then moved up as a better second candidate with 72.9 percent.

That could be it seeing as December only stands at 44.3 percent chance, falling from 63 percent a day ago.

“I don’t think today’s action or yesterday’s action is going to cause the Fed to change their mind. Now if this goes on for another three or four days and we’re down 500, 8000, 1,000 points maybe yes,” argued director Kenny Polcari. “The market is at these extraordinary highs because the Fed kept pumping money into the system and said everyone don’t worry about it. Now we’re in a position where we don’t know how to get out.”

Dow’s Downfall

Dow Jones index drop

The Dow Jones Industrial Average recorded its biggest single-day point drop on Monday afternoon. The index was down almost 1,600 points during trading hours before slightly improving to close down at 1,175.

Chevron weighed heavy on the index after it missed expectations in its latest financial report on Friday. The company’s shares dropped by more than 13 percent since last week.

Both Johnson & Johnson and Pfizer fell almost 10 percent in the past week. This followed the announcements made by Amazon, J.P. Morgan, and Berkshire Hathaway regarding a collaborative effort to lessen health-care costs for their employees.

Other laggards in Dow Jones include Home Depot – down 9.6 percent, Caterpillar – falling by 8 percent, and Walmart – dropping 6.1 percent. These tumbles happened since the 52-week high recorded by the index.

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