US stocks dipped on Thursday, paring gains after a rally on Wall Street on Wednesday, as traders continued to weigh in on the Federal Reserve’s latest monetary policy decision.
The S&P 500, Dow and Nasdaq fell sharply. Tech stocks underperformed and the Nasdaq sank 5% in its worst day since June 2020. The Dow lost more than 1,000 points, or 3.1%, to end at 32,997.97 . A day earlier, the blue-chip index posted its best single-session gain since May 2020, up 2.99%. The Nasdaq Composite rose 3.2% and the Dow added more than 900 points, or 2.8%.
The moves came in the wake of the Federal Reserve first rate hike of half a point since 2000, as the central bank took a notable step to tackle inflation that is running at the highest rates in 40 years. The central bank also outlined its plans to begin removing assets from its $9 trillion balance sheet from June 1. The pace of this announced balance sheet reduction largely matched Wall Street’s expectations ahead of the Fed’s statement on Wednesday.
“Thursday’s selloff in stocks suggests that market action after Wednesday’s FOMC was a relief rally. We’re not out of the woods yet, as there’s still too much uncertainty about how the Federal Reserve’s actions they will control inflation without causing a recession,” Zach. Stein, Carbon Collective’s chief investment officer, wrote in an email Thursday. “The concerns that triggered the stock market correction over the past few months, such as inflation, the Russia-Ukraine war and rising oil prices, are still with us and have not yet been resolved.”
But more importantly, during his press conference on Wednesday, Fed Chairman Jerome Powell suggested that the central bank was is not currently discussing plans to raise interest rates by 75 basis points short term. Stocks had risen immediately after those remarks, with many investors breathing a sigh of relief that the Fed was unlikely to raise interest rates even more aggressively in the coming months. Some had feared such a move would cause too much of a jolt to an economy that was already showing some signs of slowing. Still, Powell suggested there was a “broad sense among the committee that additional increases of 50 basis points should be on the table in the coming meetings.”
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“I think really what happened yesterday is that sentiment became so one-sided, really worried about an overly phony Fed,” Keith Lerner, chief market strategist at Truist, told Yahoo Finance Live on Thursday morning. “And one bit of good news was a Powell basically said that 75 basis points is off the table. I still think the debate about peak inflation and how quickly it will come down will inject volatility.”
And even in the absence of 75 basis point rate hikes, the Fed’s path to raising interest rates from very low levels and embarking on quantitative tightening still poses a risk to economic growth, as markets have become accustomed to accommodative central bank monetary policies. during the pandemic. Powell himself acknowledged that there would be some trade-off between reducing inflation and maintaining economic activity.
“There may be some pain associated with going back to it, but the big pain is not treating inflation and allowing it to fix itself,” Powell said during his press conference.
Others also emphasized these risks.
“In every policy move, there are negative consequences, which are expected to be muted and have less impact than the problem being addressed and today that problem is inflation,” wrote Rick Rieder, chief investment officer of BlackRock global fixed income. “The consequences we risk in tightening policy are a possible recession, a possible loss of jobs and wages and clearly tighter financial conditions that will weigh on virtually all financial markets.”
“There are many factors outside the Fed’s control (for example, supply chain disruptions and geopolitics), but we will be watching closely to see how the Fed’s tightening of financial conditions affects the global economy and employment levels, which are very firm today, but clearly can be softened along with aggressive inflation-fighting monetary policy,” Rieder added.
4:04 PM ET: Stocks fall in violent reversal from previous session: Nasdaq falls 5%, Dow loses 1,060 points, or 3.1%
Here were the top moves in the markets as of 4:04 PM ET:
S&P 500 (^GSPC): -153.27 (-3.56%) to 4,146.90
Dow (^DJI): -1,063.09 (-3.12%) to 32,997.97
Nasdaq (^IXIC): -647.16 (-4.99%) up to 12,317.69
Crude (CL=F): +$0.47 (+0.44%) to $108.28 a barrel
Gold (GC=F): +$10.20 (+0.55%) to $1,879.00 per ounce
10-year treasury (^TNX): +14.9 bp to yield 3.0660%
10:44am ET: Stocks fall, Nasdaq falls more than 3%
Here were the top moves in the markets as of 10:43 a.m. ET:
S&P 500 (^GSPC): -119.32 (-2.77%) to 4,180.85
Dow (^DJI): -728.01 (-2.14%) up to 33,333.05
Nasdaq (^IXIC): -527.44 (-4.07%) up to 12,437.42
Crude (CL=F): +$1.51 (+1.40%) to $109.32 a barrel
Gold (GC=F): +$17.00 (+0.91%) to $1,885.80 per ounce
10-year treasury (^TNX): +12.9 bp for a return of 3.0460%
10:02 am ET: Weekly jobless claims rise to 200,000 for first time since February
Initial U.S. jobless claims rose to 200,000 for the first time since February last week, but were still at a historically low level as the labor market remained tight.
Initial jobless claims rose to the 200,000 mark for the week ended April 29, the Labor Department said in its weekly report on Thursday. In the previous week, claims had risen to 181,000.
Continuing jobless claims, which track the total number of individuals filing claims in regular state programs, fell to 1.384 million from 1.403 million the previous week. This marked the lowest level of continued claims since January 1970.
9:34 am ET: Stocks open lower
Here were the top market moves as of 9:34am ET:
S&P 500 (^GSPC): -50.41 (-1.17%) to 4,249.76
Dow (^DJI): -302.44 (-0.89%) up to 33,758.62
Nasdaq (^IXIC): -217.35 (-1.68%) up to 12,747.51
Crude (CL=F): +$2.89 (+2.68%) to $110.70 a barrel
Gold (GC=F): +$33.20 (+1.78%) to $1,902.00 per ounce
10-year treasury (^TNX): +8.6 bp to get 3.0030%
7:50 am ET: Stock futures are lower
S&P 500 futures (IS=F): -28.25 points (-0.66%) up to 4,267.00
Dow futures (YM=F): -162 points (-0.48%) up to 33,806.00
Nasdaq Futures (NQ=F): -116.00 points (-0.86%) to 13,415.25
Crude (CL=F): +$0.79 (+0.73%) to $108.60 a barrel
Gold (GC=F): +$28.80 (+1.54%) to $1,897.60 per ounce
10-year treasury (^TNX): +3.5 bp to get 2.95%
6:01 PM ET Wednesday: Stock futures open lower
Here’s where the markets were trading Wednesday evening:
S&P 500 futures (IS=F): -6 points (-0.14%) to 4,289.25
Dow futures (YM=F): -40 points (-0.12%) up to 33,929.00
Nasdaq Futures (NQ=F): -20.5 points (-0.15%) to 13,510.75
A trader works on the floor of the New York Stock Exchange NYSE in New York, U.S., April 26, 2022. U.S. stocks fell on Tuesday with the tech-heavy Nasdaq closing down nearly 4 percent in as selling intensified on Wall Street. . The Dow Jones Industrial Average fell 809.28 points, or 2.38 percent, to 33,240.18. The S&P 500 fell 120.92 points, or 2.81 percent, to 4,175.20. The Nasdaq Composite dropped 514.11 points, or 3.95 percent, to 12,490.74. (Photo by Michael Nagle/Xinhua via Getty Images)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.