U.S. stocks tumbled on Thursday, with growth stocks bearing the brunt of the sell-off, following the Federal Reserve’s biggest interest rate hike in nearly 30 years to combat high inflation in decades. recession concerns.
The rally after the US Fed’s decision failed, with the S&P 500 falling 3%, at its lowest level since December 2020.
All 11 major S&P sectors fell in morning trade. The energy and consumer discretionary sectors were the biggest losers, down 4.2% and 3.6%, respectively.
Mega-cap growth companies like Amazon.com, Microsoft, Apple and Tesla all fell between 2.5% and 6%, also pressured by rising US Treasury yields.
Kroger Co plunged after the supermarket company said higher costs hurt profit margins. Revlon filed for Chapter 11 bankruptcy as the supply chain crisis proved a tipping point for the heavily indebted cosmetics giant.
Among the major US banks, Morgan Stanley led the loss with a 4% slip.
By 9:56 a.m. ET, all components of the Dow were in the red, while 496 components of the S&P 500 index fell.
At 9:56 a.m. ET, the Dow Jones Industrial Average was down 692.04 points, or 2.26%, to 29,976.49 and the Nasdaq Composite was down 355.94 points, or 3.21%, at 10,743.21.
Yields on the two-year Treasury note continued their rapid rise, rising 20 basis points to 3.39% on Thursday. They then doubled their gains after weak housing data showed how higher rates are slowing the property market. Mortgage rates in the US rose by the most since 1987.
Claiming that it was essential to tame inflation, Jerome Powell engineered the biggest rate hike since Wednesday 1994 and raised the clear possibility of another sharp hike in July. While the Fed chief sought to soften the blow of a 75 basis point increase by saying he did not expect moves of that scale to be the norm, he acknowledged the chance of a recession effectively.
Dennis DeBusschere, founder of 22V Research, wrote: “Our main exit to the Fed is hawkish – meaning the Fed will accept recession risks to deliver below-trend economic growth.”
According to JPMorgan Chase & Co., the S&P 500 index now implies an 85% chance of a US recession due to concerns about Fed policy flaws, according to JPMorgan Chase & Co. Eleven recessions are over and after it collapsed into a bear market amid fears of rising inflation and aggressive interest rate hikes.
Peter Tchir, head of macro strategy at Academy Securities, said: “The market gets what it wants, but maybe, just maybe, up 75 bps in an economy that is weakening rapidly. must be the best idea.
“Despite their reassurances, I don’t know if the Fed has the tools they say they do to bring prices down,” said Jason Brady, managing director at Thornburg Investment Management.
“The band’s support has not been cut off and, if so, greater uncertainty about the extent of the band’s magnitude,” said Neil Campling, head of technology, media and telecommunications research at Mirabaud Securities. The next move was up.
Elsewhere, investors dumped European bonds and the franc appreciated after a surprise Swiss interest rate hike. The pound rose as the Bank of England raised interest rates by a quarter of a percentage point today, easing pressure for a bolder move to counter the price hikes that have pushed inflation to all-time highs. in 40 years.
The bank’s monetary policy committee voted March 6 to raise the key interest rate to 1.25%, with dissidents favoring a larger half-point increase.
