Equity markets retreat for the third day running and momentum is building in the wake of the FOMC statement. The FOMC hiked rates by an historic 75 basis points on Tuesday and aims to hike by another 150 to 175 basis points by next summer. The move has the rate on the 30-year mortgage up to 7.0% and rising which is sure to cut even deeper into home building activity. Reports from Lennar and KB Home show demand is still strong but starting to fall off under the pressure of rising prices and higher rates. At the pace the FOMC is going, the housing industry is facing a contraction in revenue and earnings that could begin early next year and lead to a deepening recession in America.

The S&P 500 fell about 0.85% extending the downdraft that began two weeks ago. The move is driven by inflation, the FOMC, and their impact on the outlook for earnings which is in decline. The technical signals are clear, the S&P 500 is in a major correction and it could be another 2 to 3 quarters before the selling is over.