US stocks fell sharply, led by technology and other growth stocks, as investors assessed the implications of the Federal Reserve’s tightest monetary policy in more than two decades.
The S&P 500 fell 4.1% as losses accelerated midday Thursday. The technology-focused Nasdaq Composite was down 5.3%, and the Dow Jones Industrial Average was down 3.5%, or 1,220 points. All three indexes are on their way to Wipes off Wednesday’s gains.
In the bond market, the yield on the 10-year Treasury rose to 3.084% from 2.914% on Wednesday. Bond prices and yields They move in opposite directions. On Wednesday, bonds posted a rebound along with stocks before losing steam.
said John Ingram, chief investment officer and partner at Crestwood Advisors.
The decline came a day after major US stock indexes rose, with the Dow Jones rising more than 900 points, its biggest one-day gain since 2020. On Wednesday, central bank officials approved Increase the interest rate by half a percentage pointand raised the federal funds rate to a target range between 0.75% and 1%.
But it was Federal Reserve Chairman Jerome Powell who initially revitalized the markets after he said officials had not seriously considered raising interest rates by three-quarters of a percentage point. Instead, he noted, additional increases of half a point may be warranted at upcoming meetings.
Powell’s comments provided comfort to investors who were increasingly afraid that the Federal Reserve could raise interest rates too much and too quickly and eventually push the economy into recession.
“Yesterday the market had a comfortable recovery,” said Sima Shah, chief strategist at Principal Global Investors. By Thursday, the more challenging environment realities for stocks were beginning to settle. Although she said she believes inflation has either peaked or is close to peaking, other macroeconomic considerations will continue to influence investors and the trajectory of interest rates, she said.
Even as interest rates increase further in the coming months, investors still face the sharpest tightening of US monetary policy since 2000 — the last time the central bank raised rates by half a point.
Many investors are now wondering how far the Fed might raise interest rates over the next two years amid rising inflation and how that might spread across the economy and corporate earnings.
“It’s as if we all take medication, they have to build up in your system and these increases in federal funds are always delayed. At the same time, market pricing in much more is tightening financial conditions that have an impact on the real estate and mortgage market,” said Tim Horan, chief investment officer for fixed income at the Shelton Trust. “That gets some Fed job done until this drug builds up enough that it really becomes a critical ‘kill the dragon moment’.”
On Thursday, those tensions were seen across the market. Growth stocks were hit particularly hard. chip makers
They all decreased by at least 4.3%. Shares of technology company Megacap also fell, with
The fall is 6.3% and
Higher interest rates can reduce the attractiveness of technology stocks by reducing the value investors place on their future earnings. Higher returns in general also enhance the attractiveness of fixed income products against riskier assets such as stocks.
buck the trend, arrow
3.5% jumped to $50.85 after Tesla CEO
He said he had received letters from investors More than $7 billion in new funding committed To boost the stock portion of his bid to buy the social media company. Last month, Twitter agreed a deal with Mr. Musk to make the company private for $54.20 a share.
It jumped 5% after its revenue beat expectations and said it has seen global travel trends strengthen in the current quarter.
It fell 16% after the online market issued lower-than-expected guidance for the current quarter.
He lost 10% after reducing guidance on the effects of the war in Ukraine.
It also fell, losing 21%, after the online home goods retailer posted a larger-than-expected quarterly loss.
First-quarter earnings missed analyst expectations, sending the stock down 17%.
“We are struggling to see who will be a huge buyer of the shares in the next couple of weeks,” said Viraj Patel, global macro strategist at Vanda Research. “It’s a waiting game for that catalyst…You need more conviction from the data, either to show inflation has peaked or the economy is slowing and the Fed won’t need to be as strong.”
Assets that investors consider safer were among those that will rebound on Thursday as money managers look for havens as stocks and bonds tumbled side by side. Even after Wednesday’s rally, some strategists and investors said they were hesitant about the stock market outlook in the coming weeks and months.
“If they try to do a lot of work and the market becomes unconnected, then they do it [Fed] “This is the exact line that the Fed is trying to follow — to do too much,” said Jordan Khan, chief investment officer at ACM Funds. [rate increases] Because they think the market can digest without disturbing them too much.”
The WSJ Dollar IndexWhich measures the US currency against another basket of 16, up 1.3%. On Wednesday, the index fell 0.9%, its biggest drop since November 2020. The dollar’s status as the world’s reserve currency makes it a particularly attractive haven for investors.
Gold, another preferred haven, also rose 0.6% to $1,879.70 an ounce.
Sterling fell 2% against the dollar to $1.2378 after the Bank of England raised interest rates, but signaled that. Likely to move with caution In the coming months, fears grow about sliding into recession.
In the oil markets, Brent crude, the international benchmark for oil, rose 0.7% to $110.96 a barrel. On Wednesday, Brent crude posted its biggest one-day gain in more than three weeks after the European Union proposed a six-month ban on imports of Russian crude and on refined oil. Oil products from the country by the end of the year. The Organization of the Petroleum Exporting Countries and its allies, called the OPEC+ community, are expected to meet on Thursday to discuss production targets.
Offshore, the Stoxx Europe 600 Continental Index was down 0.7%. Banks, technology stocks and transport companies rose. Italian bank
It jumped 4% after its revenue came in above analyst expectations.
jumped 6.6% after the aircraft manufacturer reported an increase in net income and moved to increase production One of its best-known single-aisle A320 aircraft.
3% profit After growing its profits in the first quartersupported by higher commodity prices.
In Asia, Hong Kong’s Hang Seng Index is down 0.4% and the Shanghai Composite Index is up 0.7%. Markets in Japan are closed for a holiday.
Write to Caitlin McCabe at [email protected] and Hardika Singh at [email protected]
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