US Majors Plunge Below Critical Support As Dudley Warns Fed Needs To “Shock Market”

The second half of March came to an end and so did the meltup. Building on yesterday’s losses – as we detailed here – this morning’s breakdown has snapped all the major US equity markets below critical technical support levels.

The S&P is back below its 200DMA. The Dow and Russell 2000 are back below their 50DMA, and Nasdaq is rapidly accelerating down towards it 50DMA…

This comes as former NYFed President Bill Dudley issues another post-service op-ed warning that “If Stocks Don’t Fall, the Fed Needs to Force Them”…

It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far.

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Investors should pay closer attention to what Powell has said: Financial conditions need to tighten. If this doesn’t happen on its own (which seems unlikely), the Fed will have to shock markets to achieve the desired response. This would mean hiking the federal funds rate considerably higher than currently anticipated. One way or another, to get inflation under control, the Fed will need to push bond yields higher and stock prices lower.

Sounds familiar?