The U.S. stock market’s main indexes fell on Tuesday after U.S. Federal Reserve Governor Lael Brainard said she expects rapid reductions to the central bank’s balance sheet.
The tech-heavy Nasdaq led losses as expectations of quicker interest rate hikes dulled the appeal for high-growth stocks. Amazon.com Inc, Apple Inc, and Nvidia Corp fell between 1.4% and 3.8%.
“What is spooking the market is the phrase ‘at a rapid pace’ because that implies they (Fed) will not only allow bonds to mature, but will also be selling bonds in order to get to a more neutral policy by the end of the year,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “That’s what’s causing investors to be concerned – the speed and aggressiveness of the Fed with its balance sheet reductions.”
Investors now expect nearly 78.8% odds of a 50 basis points rate hike at the U.S. central bank’s meeting in May, a slight rise from 74.9% in the previous session, according to CME Group’s Fedwatch tool.