To hike or not to hike? That is the Fed’s question

FXOpen

Today, futures contracts which are related to North American stocks have taken a bit of a downturn in projected value as today is another day in which the United States Federal Reserve Bank – known as The Fed – is set to announce its position on interest rate adjustments.

In advance of the opening session in New York today, futures contracts which related to stocks listed on the Dow Jones Industrial Average fell 29 points which equates to a 0.1% drop, S&P 500 futures were down 0.1%, while Nasdaq-100 futures dipped 0.2%.

The Federal Reserve Bank has been holding a policy meeting which has taken place over the past two days, with the final day being today and investors and traders are awaiting the outcome, which may reveal a further increase in the base rate of interest across the United States.

Speculators and analysts have been looking at the possibility of the Federal Reserve implementing a 25 base point increase in the base rate of interest, as well as a possibility of tightening of monetary policy especially given the recent contagion across the United States banking sector in the aftermath of the collapse of Silicon Valley Bank.

During the past few days, smaller regional banks have been affected and now First Republic is teetering on the brink of collapse resulting in a 61% drop in share price last week and a bank run which meant that many investors withdrew their money, subsequently depositing it with larger Tier 1 banks.

Rather incredibly, a batch of larger banks this week took their customers funds to the tune of $30 billion and deposited it in First Republic to prop it up.

As a result of this turn of events, confidence in the US banking sector is very low once again, and futures contracts on major indices are showing the bearish approach many investors are taking at a time when banks are struggling, and interest rates may rise again.

Fascinatingly, these stocks, usually traded by conservative investors due to their relative stability and long-standing presence on major exchanges are down, and the overall sentiment within the banking and US monetary situation is cautious to say the least, yet a meme stock that was responsible for the infamous market short in January 2021 is soaring.

GameStop, the entertainment firm which appeared in high profile news reports two years ago because of the reddit group WallStreetBets effectively ‘market making’ on social media and shorting the stock, causing a black swan event, is on the up.

The company, listed on the NASDAQ exchange, reported a 22.4% growth in margins and as a result, its stock soared by 43%.

It is an interesting day, when the banks, some of which are hundreds of years old, are causing more fear than a meme stock!

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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