Stocks fall after rally as traders digest Fed decision

U.S. stocks fell on Thursday, restoring gains after a rally on Wall Street on Wednesday as traders continued to consider the Federal Reserve’s latest monetary policy move.

The S&P 500, Dow and Nasdaq fell sharply as losses accelerated during intraday trading. Tech stocks underperformed and the Nasdaq fell 3.3% just before 11 a.m. in New York. A day earlier, the blue-chip index posted its best single-session gain since May 2020, up 2.99%. The Nasdaq Composite jumped 3.2% and the Dow added more than 900 points, or 2.8%.

The measures came in the wake of the Federal Reserve’s decision first rate hike of half a point since 2000, as the central bank took a notable step to curb inflation which is currently at its highest rate in 40 years. The central bank also announced 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 Wednesday’s Fed statement.

More importantly, during his press conference on Wednesday, Fed Chairman Jerome Powell suggested that the central bank was not currently discussing plans to raise interest rates by 75 basis points Short term. Stocks rose immediately after the 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 feared that such a decision would produce too strong a jolt to the economy which was already showing signs of slowing down. Still, Powell suggested there was “a general feeling within the committee that additional 50 basis point increases should be on the table at the next two meetings.”

“Markets got what they were asking for today as the Fed made a 50 basis point hike in the policy rate. With few signs of inflation slowing, the Fed aims to bring the rate director to a more neutral level in a relatively short period of time,” Chris Ripley, senior investment strategist at Allianz Investment Management, wrote in an email. market expectations are already taken into account.

But even in the absence of oversized 75 basis point rate hikes, the Fed’s path to raising interest rates from ultra-low levels and embarking on quantitative tightening still poses a risk to the economic growth, as the markets have become accustomed to the central bank’s accommodating monetary policies. during the pandemic. Powell himself recognized that some trade-off would take place between reducing inflation and maintaining economic activity.

“There may be some pain associated with going back to that, but the big pain is not dealing with inflation and allowing it to take root,” Powell said during his press conference.

Others have also pointed to these risks.

“In all policy action there are negative consequences, which hopefully are mitigated and less impactful than the problem that is being addressed and today that problem is inflation,” Rick wrote. Rieder, BlackRock’s chief investment officer for global fixed income. “The consequences we risk having by tightening policy are a potential recession, potential job and wage losses, and clearly tighter financial conditions that will weigh on virtually all financial markets.”

“Many factors are beyond the Fed’s control (supply chain disruptions and geopolitics, for example), but we will closely monitor the impact of the Fed’s tightening financial conditions on the broader economy and financial levels. employment, which are very firm today, but can clearly soften along with an aggressive inflation-fighting monetary policy,” added Rieder.

10:44 a.m. ET: Stocks drop, Nasdaq drops more than 3%

Here are 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%) to 33,333.05

  • Nasdaq (^IXIC): -527.44 (-4.07%) to 12,437.42

  • Raw (CL=F): +$1.51 (+1.40%) at $109.32 per barrel

  • Gold (CG=F): +$17.00 (+0.91%) to $1,885.80 per ounce

  • 10-year cash flow (^TNX): +12.9 bps for a yield of 3.0460%

10:02 a.m. ET: Weekly jobless claims hit 200,000 for first time since February

Initial jobless claims in the United States hit 200,000 for the first time since February last week, but still held at a historic low as the labor market remained tight.

Initial jobless claims hit the 200,000 threshold for the week ended April 29, the Labor Department said in its weekly report Thursday. In the previous week, claims had totaled 181,000.

Continuing unemployment claims, which track the total number of people filing claims under the state’s regular programs, fell to 1.384 million from 1.403 million the previous week. This is the lowest level of continued claims since January 1970.

9:34 a.m. ET: Stocks open lower

Here are the top moves in the markets as of 9:34 a.m. ET:

  • S&P 500 (^GSPC): -50.41 (-1.17%) to 4,249.76

  • Dow (^ DJI): -302.44 (-0.89%) to 33,758.62

  • Nasdaq (^IXIC): -217.35 (-1.68%) to 12,747.51

  • Raw (CL=F): +$2.89 (+2.68%) at $110.70 per barrel

  • Gold (CG=F): +$33.20 (+1.78%) at $1,902.00 per ounce

  • 10-year cash flow (^TNX): +8.6 bps for a yield of 3.0030%

7:50 a.m. ET: Stock futures fall

  • S&P 500 Futures Contracts (ES=F): -28.25 points (-0.66%) to 4,267.00

  • Dow futures (JM=F): -162 points (-0.48%) to 33,806.00

  • Nasdaq futures contracts (NQ=F): -116.00 points (-0.86%) to 13,415.25

  • Raw (CL=F): +$0.79 (+0.73%) at $108.60 per barrel

  • Gold (CG=F): +$28.80 (+1.54%) to $1,897.60 per ounce

  • 10-year cash flow (^TNX): +3.5 bps for a yield of 2.95%

6:01 p.m. ET Wednesday: Stock futures open lower

Here’s where the markets were trading Wednesday night:

  • S&P 500 Futures Contracts (ES=F): -6 points (-0.14%) to 4,289.25

  • Dow futures (JM=F): -40 points (-0.12%) to 33,929.00

  • Nasdaq futures contracts (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 plunged on Tuesday with the tech-heavy Nasdaq closing down nearly 4%, as the sell-off intensified on Wall Street.  The Dow Jones Industrial Average fell 809.28 points, or 2.38%, to 33,240.18.  The S&P 500 fell 120.92 points, or 2.81%, to 4,175.20.  The Nasdaq Composite Index lost 514.11 points, or 3.95%, to 12,490.74.  (Photo by Michael Nagle/Xinhua via Getty Images)

A trader works on the floor of the New York Stock Exchange NYSE in New York, U.S., April 26, 2022. U.S. stocks plunged on Tuesday with the tech-heavy Nasdaq closing down nearly 4%, as the sell-off intensified on Wall Street. The Dow Jones Industrial Average fell 809.28 points, or 2.38%, to 33,240.18. The S&P 500 fell 120.92 points, or 2.81%, to 4,175.20. The Nasdaq Composite Index lost 514.11 points, or 3.95%, to 12,490.74. (Photo by Michael Nagle/Xinhua via Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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