The S&P 500 index, the benchmark index of the US stock market, recorded its longest losing streak since the beginning of this year in the context of the latest statements from the Fed and high yields of bonds issued by the US government, according to Markets Insider. .

The S&P 500 was down another 0.2% at the close on Monday after another 4 consecutive days of declines last week. According to data from the specialized company Refinitiv, the last time the US stock market ended 5 consecutive days in the red was last December.

But the New York Stock Exchange has made impressive gains this year amid hype about artificial intelligence (AI) and companies in the field and widespread investor expectations that the Federal Reserve, the central bank in Washington, will ease monetary policy. .

The Fed raised the key interest rate several times last year to reduce historic inflation, but both investors and most analysts expected the US central bank to start cutting it to avoid a recession in the US economy.

But with the world’s most powerful economy falling short of economists’ expectations and appearing to have avoided a technical recession, the Fed has even raised key interest rates this year to further reduce inflation as the US prepares for the 2024 presidential election.

By the way, last May, President Joe Biden had a rare meeting with Powell at the White House to discuss the fight against inflation, which the Democratic leader called the “top priority” of his presidency.

Why the American stock market entered the “red”

Powell suggested last week that Fed officials are leaning toward leaving interest rates unchanged at the November meeting, but they remain open to the possibility of another rate hike if the U.S. economy raises “inflationary risks.”

In these conditions, the index The S&P 500 is down 8% from its July 31 peak, the Nasdaq Composite is down 9% and the Dow Jones Industrial Average is down more than 2,500 points. in the same period of time.

In addition to a reassessment of expectations for the Fed’s monetary policy, the U.S. stock market was also hit by the fact that the yield on the 10-year U.S. Treasury note rose nine basis points to 5.01%, the highest level since 2007 on Monday. .

“From an economic point of view, 5% is just another number. But for investors, this is a signal,” said Chris Skicluna, chief economist at Daiwa Capital.

The U.S. stock market tends to fall during periods when Washington Treasuries, considered among the safest investments in the world, have high yields.

This is because at such times investors prefer to divert their money to buying bonds instead of listed stocks, because the premiums are guaranteed by the US Treasury and provide safe returns, while private stocks can always decline.

Since the end of July so far, the US dollar has gained 4% against the euro and 5% against the British pound.