Why did the US stock market drop at the end of yesterday’s trading session? 

Wall Street went down yesterday

Wednesday has been a negative day for the US stock market.

All three major US indexes closed in a loss.

The S&P 500 finished at -1.65%, the Nasdaq ended the trading session at -1.60% and the Dow Jones closed at -1.63%.

Initially, the markets went up following the confirmation of a 25 basis points hike, but near the end of the trading session, the market changed direction after Yellen’s comment about the US deposits.

The investors’ sentiment is Fear, as indicated in the graph below:

Sentiment indicator – Fear & Greed Index

The market sentiment is 36, in “Fear” mode, up from last week’s data in Extreme Fear.

Why did the US stock market drop at the end of yesterday’s trading session?

On Wednesday, the Federal Reserve made the decision to hike the interest rate by another 25 basis points, in a unanimous vote, as expected.

That was the ninth consecutive time that the Fed hiked the interest rate, bringing the Fed Funds rate to the 4.75%-5% range, the highest since September 2007, before the financial crisis.

With the latest monetary policy action, it is clear that the Fed’s priority is to reduce inflation and bringing to its 2% target, in fact, the FOMC believes that additional tightening may be necessary in order to reach that goal.

Jerome Powell attended a press conference to clarify some points, and it was very interesting what he said.

He said that the Federal Reserve’s liquidity injection into the financial system demonstrates that deposits and the banking system are safe, following the recent collapse of SVB.

It is worth mentioning that Powell said the Fed is not doing Quantitative Easing at this moment even though it has expanded its balance sheet.

Mr Powell, also said, that the banking turmoil of the past two weeks, which could restrict credit access to households and businesses, will reduce inflation.

A pause in interest rate increases would have been a negative signal for the markets because the reason behind could have been a more serious problem in the financial system.

The US markets have positively responded to the latest monetary policy action and Jerome Powell’s speech, but it all changed after, Janet Yellen, the Treasury Secretary said:

“We are not considering insuring all uninsured bank deposits.”

That particular sentence has brought fear in the markets that have led to a selloff, especially for the banks’ stocks.

Portfolio update

I remain neutral and cautious about the stock market.

I hold long and short stock positions and aim to profit regardless of the market direction.

If you are already copying my portfolio, please keep the copy open.

If you are thinking of copying me, now could be the right time, if you can invest for the long term (years).

Remember to copy the open trades to optimize the copy.

Remember to set the stop loss on the copy at the minimum level, so you don’t get stopped if there is a correction.

Thank you, everyone. Have a nice day!

Steps to follow to copy my portfolio automatically:

1. Create an eToro account here: https://federicamontella.com/go/etoro/

2. Verify your account and make a deposit of at least 200 USD (you can deposit in any currency, like GBP and EUR)

3. Go to my profile page: https://federicamontella.com/go/etoro-passionforprofit/

4. Start the copy (copy open trades and set the lowest stop loss possible, to allow some movement)

5. Enjoy, it’s all automatic. You will make passive income 24/7

Let me know if you have any questions.


Federica Montella

eToro Popular Investor


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Author: Federica Montella
eToro Popular Investor, food lover and blogger. Stock trader and Popular Investor at eToro. I am on a mission to find the best restaurants and food to eat.