Fed speak kills risk appetite, stocks decline, US data, cryptos weaken

US stocks are declining as the Fed sticks to the hawkish script that supports the idea that this economy is quickly heading towards a recession. ​ Equities extended declines after the latest round of Fed speak reminded us that policymakers could remain very hawkish, despite a downshift to a half-point pace in December. ​Fed’s Bullard noted that the policy rate is not yet ‘sufficiently restrictive’. ​ He also highlighted a dovish scenario that could take the funds rate to 5% and a hawkish rate at 7%. Bullard said, he’s targeting a minimum of another 125 basis points in rate hikes, which would bring the target range to 5.00-5.25%. ​

Fed’s George said, “I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.”

If we still have millions of job openings and inflation above rates, the Fed may need to continue hiking beyond February. ​ ​

This bear market rally is coming to an end as this economy is about to feel the real impact of restrictive territory. The latest round of economic data complicates the Fed’s tightening path as the labor market is slowly softening and as the housing market is in a recession. ​

US data

Weekly jobless claims edged lower despite what feels like a couple of weeks of significant job loss announcements. ​ Initial jobless claims fell from a revised 226,000 to 222,000 in the week ending November 12th. ​ Continuing claims rose to 1.507 million but is still below the pre-pandemic average of 1.7 million. The job market is going to weaken, but the longer it takes, the greater the risks that we might see more Fed tightening. ​

The Philadelphia Fed business outlook crumbled in November. ​ The headline manufacturing activity reading plunged to -19.4, worse than the estimate of a decline of 6. ​ The employment component showed a significant drop from 28.5 to 7.1. ​ This part of the economy is clearly weakening, but firms continue to report overall price increases. ​ ​

The housing market correction continues and is approaching a bottom. ​ Both starts and permits continue to decline as borrowing costs skyrocket, inventory levels are growing, and the typical single-family home purchaser is much weaker as inflation runs wild. ​


Cryptos are weakening as risk appetite just left the building. ​ Today’s weakness is mainly attributed to exhaustion with the bear market rally that has powered stocks. ​ There is no shortage of news across crypto markets and a lot of it is speculative. We will be talking a lot about FTX for months to come but what will drive the cryptos is if Binance, Coinbase, Lbank, or Consbit have any liquidity crunches.

A lot of bad news has been priced in so it might take another downfall of a major crypto company or a de-risking movement on Wall Street to take bitcoin below its recent low. ​

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.

Ed Moya

Ed Moya

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