Interest rates are once again gripping US investors. The head of the Federal Reserve of St. Louis, James Bullard, has said he expects a rate hike by the end of next year.
That is faster than the Fed indicated in its interest rate decision earlier this week. The main indicators on Wall Street, therefore, started trading in the negative on Friday.
The US umbrella organization of central banks kept interest rates unchanged on Wednesday but hinted at two rate hikes in 2023. That was already a setback for investors. In March, the Fed indicated that it did not foresee a rate hike until at least 2024. But according to Bullard, inflation is rising faster than forecast, which would be a reason to come with an interest rate hike even quicker.
Investors struggle with the message that interest rates must rise faster. If interest rates go up, debts become more expensive, and companies will spend more money on interest charges. This can put pressure on the profits of companies and thus also the valuation of shares. This makes investing less attractive.
After the interest rate decision on Wednesday, stock prices already fell. The Dow-Jones index was down 0.9 percent on Friday shortly after the opening bell at 33,509 points. The broad S&P 500 fell 0.8 percent to 4189 points, and technology indicator Nasdaq dropped 0.5 percent at 14,094 points.
According to analysts, what also plays a role in the falling prices is that many so-called stock options expire. In addition, oil prices fell, and the dollar value reached its highest point in about two months.