Stocks fall as Fed Chairman Powell signals intention to continue rate hikes
Shares fell on Wednesday after Federal Reserve Chairman Jerome Powell said inflation was still too high and indicated that the central bank had more rate hikes to come.
The Dow Jones Industrial Average slipped 505.44 points, or 1.55%, to 32,147.76. The S&P 500 fell 2.5% to close at 3,759.69, while the Nasdaq Composite plunged 3.36% to end at 10,524.80.
The Fed has implemented another 0.75 percentage points rate hike on Wednesday afternoon, and Powell told a press conference that his fight against inflation was far from over.
“We still have some way to go and the data received since our last meeting suggests that the ultimate level of interest rates will be higher than expected,” he said.
Powell added that it was “premature” to talk about suspending hikes.
“We have a long way to go,” the central bank president said.
Stocks initially rallied after the rate hike when the Fed accompanied statement hints at possible policy change in the future. “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” , the statement said.
But traders’ hopes were dashed by Powell’s still tough talk on inflation.
“The tone of Fed Chairman Jay Powell’s comments was quite hawkish, which means the Fed still has some way to go to fight inflation, and the level of interest rates will be higher than expected. “said Jack McIntyre, portfolio manager at Brandywine Global. . “There were no signs of complacency to indicate that the Fed might be about to take a break.”
Consumer discretionary and information technology stocks were among the worst performers of the day. Both sectors of the S&P 500 lost more than 3%. Amazon, Netflix and Meta Platforms fell nearly 5% each. Tesla and Salesforce fell 5.6% and 6.1%, respectively.
The Fed’s rate decision came after the release of strong jobs data, with better-than-expected private payrolls data for October illustrating a resilient labor market. Tuesday’s JOLTS report also pointed to a tight job market despite aggressive Fed tightening.
The Dow Jones just hit a record high in October, rallying nearly 14% for its best month since 1976. The S&P 500 and Nasdaq had gained around 8% and 3.9%, respectively, to snap a two-month streak of defeats. With Wednesday’s losses, the 30-stock index is down more than 11.5%, while the S&P 500 and Nasdaq are down 21.1% and 32.7%, respectively, since the start. of the year.