Markets are assessing the fall of shares on Wall Street on Thursday, destroying the previous day’s rally and the rise of the Federal Reserve. The fight against inflation.
The Dow Jones Industrial Average fell 1,063 points, or 3.1%, to 32,997. The S&P 500 fell 3.6% to close at 4,146, with more than 95% of companies listed in the red in the benchmark index. The technology-heavy Nasdaq fell even more sharply, down nearly 5%.
According to FactSet, June 2020 was the second worst day for the S&P 500 and the worst day for Nasdaq since that month.
Markets Gathered a day earlier After the central bank said on Wednesday, it will not move quickly because some people are afraid to raise interest rates. But traders are beginning to worry more about the impact of the central bank’s measures to reduce the need for borrowing as it tries to cool rising inflation.
“The central bank is between a rock and a hard place, and investors experience both fear and greed at the same time because of instant information,” said Sam Stowell, CFRA’s chief investment strategist.
Bond returns resumed their upward march, which will be sent Mortgage rates More. The 10-year treasury yield rose sharply to 3.1%, reaching its highest level since late 2018.
Technology companies had some huge losses and weighed on the wider market. Internet retailer Amazon fell 8.1% and Google’s parent company Alphabet fell 5.4%. Etsy fell 17.7% after giving a weak forecast.
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Investors are worried about whether the Fed’s drastic change in raising interest rates could pull off a tricky equilibrium – slowing the economy to the point of preventing high inflation, but not causing it to fall. A recent Survey Six out of 10 respondents from AllianzLife are concerned that they are an adult The recession is in the corner. “
“The focus is on whether the central bank should become more hawkish to reduce demand – and this will involve slowing down the economy more than they are currently planning,” said Quincy Crosby, lead role strategist at LPL Financial, in an email.
Yet for now, most Wall Street economists think the United States will move away from the recession this year, pointing to firmer job growth, warmer consumer spending and stronger corporate earnings.
Markets were stable this week before the policy update, but Wall Street is worried that the Federal Reserve may choose to raise rates by three-quarters in the coming months. Central Bank Chairman Jerome Powell eased those concerns, saying the central bank had not “seriously considered” such an increase.
The central bank also announced that it would begin cutting its largest $ 9 trillion balance sheet with the Treasury and mortgages from June 1.
When Powell said the central bank was not considering a massive increase in short-term rates, it sent a signal to investors that stock prices would rise and bond yields would fall. The slow pace of interest rate hikes will reduce the risk of the economy falling into recession, as well as lower downward pressure on prices for all types of investments.
But reducing the odds of a 0.75% rise does not mean that the central bank has raised rates steadily and sharply while struggling to control inflation. BNP Paribas economists still expect the central bank to raise the federal funds rate from 3% to 3.25%, from zero to 0.25% earlier this year.
“We do not think this is the intention of Add Powell,” BNP Paribas economists wrote in a statement, citing market sentiment on Wednesday.
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