Megacap growth stocks have been hammered this year as the Federal Reserve raised interest rates aggressively to tame decades-high inflation. Future cash flows on which valuation of these companies rests are discounted heavily when rates rise.
Investors widely expect the U.S. central bank to increase interest rates by another 75 basis points later on Wednesday, with focus likely to shift to how deeply signs of an economic slowdown have registered with its policymakers. Money market traders were even placing about a one-in-four chance the Fed would surprise markets with a larger 1-percentage-point increase, as per CME Group's Fedwatch tool.
The decision is due at 2:00 pm ET and Fed Chair Jerome Powell's news conference half an hour later should elaborate on how the central bank views the recent economic data and at least hint at its next steps. "If he gets some kind of indication that inflation has come under control, then that's a sign to the market that their moves are working and 50 basis points is in the cards for the next meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
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