NEW YORK- Investors are shifting their focus to the Federal Reserve’s monetary policy meeting this week as they seek cues following a recent technology-led US market sell-off.
So far, few believe the past week’s volatility in stocks – which knocked the Nasdaq down as much as 10 percent from its highs and rocked other indexes – is the start of a larger sell-off that will throw the market off its course after a six-month rally.
Some worry, however, that the moves may herald the start of a volatile period, as a much-awaited fiscal aid package stalls in the Senate and the US presidential election looms.
That’s left investors looking to the Fed for its view of the nascent US economic recovery and what the central bank may do if markets continue to slide.
“The market, especially in absence of that fiscal policy package, is looking for the Fed to do even more,” said Michael Arone, chief investment strategist at State Street Global Advisors.
“And it’s not clear that they can do more or how much they’re willing to do, at least at this point.”
The Fed slashed rates to near zero in March as stocks plunged on fears of the economic impact from the coronavirus, and has rolled out lending programs to support businesses and households. It is also buying tens of billions of bonds monthly to keep markets functioning smoothly.
Despite stocks’ recent slide, some market participants believe equities would have to tumble much further for the Fed to act.
Fed Chairman Jerome Powell said earlier this month that while the central bank will keep its foot on the monetary policy gas, lawmakers also need to help with recovery relief, making the government’s failure to pass the next round of stimulus an increasingly worrying development to some investors. — Reuters