June 26, 2022

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Dow Jones drops nearly 700 points as post-Fed rally reversals

Dow Jones drops nearly 700 points as post-Fed rally reversals

US stocks fell on Thursday, erasing the previous day’s gains on volatility continued to shake the market Investors focused on future risks.

Major indices recorded significant declines in 2022 with rising inflation, high interest rates Rising concerns about corporate earnings and economic growth have also dampened investors’ appetite for risk.

Stores crowd Wednesday After Federal Reserve Chairman Jerome Powell suggested that a 0.75 percentage point interest rate increase for the central bank this week would not become commonplace. Thursday, This optimism is gone Stocks fell across the market.

The S&P 500 was down 3.2%, while the Dow Jones Industrial Average was down 2.3%, or about 704 points, to 29,964. The Nasdaq Composite was down about 4% as major tech stocks slumped. If the Dow Jones Industrial Average closes below the 30,000 level, it will be the first time since January 2021.

“I think the markets are reassessing the market environment,” said Michael Sheldon, chief investment officer at investment advisory firm RDM Financial Group. “The outlook for growth, earnings and inflation, at least for the next few months, is not favourable, unfortunately.”

The Fed’s rate increase of 0.75 percentage points was Bigger since 1994 But it is in line with investor expectations as the central bank races to tame high inflation.

Mr. Powell said That while the central bank is not trying to cause a recession, it is becoming more and more difficult to achieve The so-called soft landingwhere the economy slows enough to curb inflation without entering a recession.

Some analysts said investors are coming to terms with it Increased risks to economic growth.

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I think that’s the realization that we could really head into a recession. “I’m not sure that has penetrated the market’s mind yet,” said Altaf Kassam, head of investment strategy for EMEA at State Street Global Advisors.

Federal Reserve Chairman Jerome Powell said the central bank’s goal is to bring inflation down to 2%. The Federal Reserve approved a 0.75 percentage point interest rate increase on Wednesday, the largest rate increase since 1994. Photo: Elizabeth Frantz/Reuters

While Mr. Powell suggested on Wednesday that an “unusually large” rate hike would not become popular, he left the door open for another 0.75 percentage point increase as soon as next month.

Ovin Devitt, chief investment officer at Moneta, said interest rate increases of this magnitude could upset investors if they feel the Fed is racing too quickly to outpace inflation. “This could lead to more market anxiety,” she said.

Technology stocks fell with nvidiaAnd the Amazon And the Microsoft Each fell at least 2.9%. Twitter Shares fell 1.1%, giving up earlier gains afterwards The Wall Street Journal reported, who – which Tesla chief executive officer Elon Musk He is expected to confirm his desire to buy the social media company when he speaks to its employees on Thursday.

TeslaAnd the

that Raising the prices of some of its cars Amid rising costs, it fell more than 7%.

The Swiss central bank surprised investors by raising interest rates for the first time in 15 years. The Swiss National Bank raised the interest rate by 0.5 percentage point to negative 0.25%, leaving only

Bank of Japan

One of the major central banks in the advanced economy is not raising interest rates to tame inflation. Economists had expected the Swiss National Bank to leave interest rates unchanged.

“This is the last hurdle to fall,” said Sima Shah, chief strategist at Principal Global Investors. “If we’re getting central banks deemed perpetually pessimistic about raising interest rates, there’s no denying that there’s a huge inflation problem in the global economy.”

Bank of England on Thursday Raised the key interest rate As expected to 1.25% from 1%, marking its fifth step in the largest number of meetings, he said that larger moves may be needed to tame inflation.

weekly Unemployment Claims Data It showed that 229,000 Americans applied for unemployment benefits in the week ending June 11. The labor market has been a strength area for the economy, but Federal Reserve officials point to weak employment numbers It may be a necessary consequence Central bank efforts to control inflation.

Return on a 10-year benchmark US Treasury Department The note slipped to 3.326% from 3.389% on Wednesday. Treasury yields, which move in the opposite direction to prices, help set prices on a variety of consumer products including mortgages and auto loans.

Bitcoin It is down 3.1% from its level at 5pm ET on Wednesday to $2,108, according to CoinDesk, putting it on track for a dip to The tenth day in a row. Cryptocurrencies have been exposed to widespread economic concerns harming risky trades, concerns about selected projects and Companies in the crypto ecosystem. Investors in the cryptocurrency lending network Celsius are unlikely to provide the company with more funding that might save the company, The Wall Street Journal reported Thursday.

In the commodity markets, Brent crude, the international oil standard, was little changed at $118.48 a barrel. Gold prices rose 1.5%.

Overseas stocks fell. The pan-continental Stoxx Europe 600 was down 2.5%. In Asia , Hang Seng In Hong Kong, it fell 2.2%, while Japan’s Nikkei 225 added 0.4%.

Stocks on Wall Street fell after a rally on Wednesday following the Federal Reserve’s interest rate decision.


picture:

Justin Lin/Shutterstock

Write to Will Horner at [email protected] and Karen Langley at [email protected]

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