World stocks took a tumble as investors grow anxious that the Federal Reserve will renege on their prior intention to cut rates.
The Fed had implied that two rate cuts would be issued in the near future, with the first one being in July. However, the release of non-farm payroll data last week showed that the U.S. economy added 224,000 jobs in June, a sharp increase from the 72,000 jobs added in May.
Such drastic improvement in the labor market, “could prompt the central bank to use a smaller knife when cutting interest rates,” said Neil Wilson, chief market analyst for Markets.com.
Federal Reserve Chair, Jerome Powell, is set to speak at the Boston Fed today. Investors will be keenly listening for any hints as to whether rate cuts can still be expected this month.
"It would be unsettling for the Fed to have grown so bearish as they did during their last meeting — hinting at two rate cuts this year — and then do nothing now," said Konstantinos Anthis, head of research at ADSS.
U.S. stocks are expected to open lower with the Dow Jones Industrial Average and S&P 500 down about 0.4%. Until investors’ anxieties about rate cuts are appeased, stocks are expected to continue dropping in value.