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Stock market faces heavy losses this week following Fed meeting

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Yahoo Finance Live anchors discuss stock futures as Wall Street enters bear market territory.

Video Transcript

- We're coming up on the final day of what has been a crushing week for the stock market as we officially enter a bear market. The NASDAQ has now lost a 1/3 of its value after peaking back in November. The S&P 500 could notch its worst week since March, 2020. All this coming on the backdrop of a quadruple witching day, as stock index futures, stock index options, stock options, and single stock futures are all expiring today.

And, Brad, that's all fine and good. But I think it is this commentary here by Jerome Powell just moments ago at this conference that really knocked futures, saying they are acutely attuned or acutely focused on bringing down inflation. Now, not new language per se. We just heard from Jerome Powell for quite a length this week at the Fed press conference. Came out and raised rates by 75 basis points.

But this is a major red flag, I think, to the bulls because it gives you a sense of what might come as other Fed speakers come out and hit the circuit over the next few weeks, more tough talk on inflation and maybe more volatility for markets.

- And look, this has really been Jerome Powell's headline week, right? 75 basis points, that leaked just ahead of the decision to come as well-- or ahead of the meeting actually beginning. And so we already had a sense of what was going to take place and what could come out of the meeting. And then it came back to the tone that he was going to be signaling in the press conference thereafter. And what did we hear? We heard more dampening down of a deep recession.

But it still came up eight times during that particular press conference. And even going on from here, you think about the GDP growth and where that's going to run, running below 2% through 2024. And so as we continue to move on throughout the rest of this year, you were taking a look through some of the probabilities.

- I don't want to look at that.

- You don't want to look at the--

[INTERPOSING VOICES]

- It's probabilities.

- It's just growth slowing down. And look, and I've got a good note moments ago from Matt Maley over at Miller Tabak, friend of the show, just consistently watching markets. And despite all of this concern on inflation and commentary from the Fed, earnings estimates on the street have actually risen. They have risen in recent weeks. And it goes back to what we've been talking about all week. You know, this market is set up for a very disappointing earnings season because Wall Street in many respects is completely out to lunch.

- I mean, for any of these companies right now, especially if you're in the retail sector where we've already seen some of the margin compression take place in the landscape for ERP, that's perhaps been one of the only bright spots. But they still have, depending upon which company we're talking about, some of those foreign exchange headwinds that they have to consider.

And so whether it be an international FX headwind that a company is taking on or whether it be some of the margin compression because you have more or higher expenses on the back of a consumer that is trying to dampen down where they are spending and where some of those expenditures are going out the door because they are paying higher at the pump as of right now, that may-- for this major scenario where we've already seen some of the downgrades in guidance, I don't know where, quite frankly, the upgrades are coming from for some of the expectations.

- Unclear to me. But I would have liked to see Jerome Powell come out here this morning and he talks about fighting inflation. And you know what? Future strengthened. To me as someone watching this market, that would have signaled perhaps a short-term bottom in the stock market. But the fact that he's coming out here continuing to warn about inflation and you see futures come off the highs and weaken off those comments and tells you that, you know, not a lot of this is priced into stocks.

And of course, we're in bear market territory across the major indices. But still, that type of reaction suggests this market is not prepared for what's likely to come economically over the next three to six months.

- I think that's a consistent question that we'll be asking a lot of guests here throughout the course of today's show, is how deep could this bear market be? What kind of bear market are we looking at right now?