NEW YORK, Jan 20 ― US stock indexes closed lower yesterday after data pointing to a tight labour market renewed concerns the Federal Reserve will continue its aggressive path of rate hikes that could lead the economy into a recession.
Investors have been looking for signs of weakness in the labour market as a key ingredient needed for the Fed to begin to slow its policy tightening measures. Recent comments from Fed officials continue to highlight the disconnect between the central bank's view of its terminal rate and market expectations.
Markets, however, see the terminal rate at 4.89 per cent by June and have largely priced in a 25-basis point rate hike from the US central bank in February, with rate cuts in the back half of the year. Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8 per cent for the fourth quarter, according to Refinitiv data, compared with a 1.6 per cent decline in the beginning of the year.