Stocks fell on Thursday, constructing on Wednesday’s losses after the Federal Reserve delivered one other three-quarter point rate of interest hike, and signaled that a pivot or rate cut won’t come anytime soon.
The Dow Jones Industrial Average traded 25 points lower. The S&P 500 and Nasdaq Composite slid 0.6% and 1.2%, respectively.
Yields spiked as traders digested the newest rate decision, putting pressure on equities. The yield on the 2-year Treasury note hit its highest level since July 2007 while the benchmark 10-year Treasury yield popped 8 basis points to 4.141%.
“The post-Fed hangover continues to maintain pressure on U.S. stocks because the impact from the primary round of hikes is finally being felt,” said Oanda senior market analyst Ed Moya. “Stocks aren’t going to have a painful death here, but they may soften until markets price in a bit more Fed hawkishness.”
Traders had anticipated the central bank’s 0.75 percentage point rate increase and initially read the Fed’s statement as dovish, suggesting smaller hikes in the longer term.
At first, that sent stocks higher on Wednesday, but those gains reversed when Fed Chair Jerome Powell said it was “premature” to debate a rate hike pause and that the so-called “terminal rate,” or the extent at which rates peak, would likely be higher than the Fed previously stated.
“We still have some ways to go and incoming data since our last meeting suggests that the final word level of rates of interest will likely be higher than previously expected,” he said.
The Dow Jones Industrial Average ended Wednesday’s trading session 505 points lower, or 1.6%. The S&P 500 dropped 2.5%, and the Nasdaq Composite was off by 3.4%.
Many expect the market to proceed to seesaw until it’s clear that inflation has cooled and the Fed will stop mountain climbing.
Investor attention also turned to October nonfarm payrolls, set to be released Friday. An excellent jobs number and a low unemployment rate, while good for the economy, could signal more work ahead for the Fed. One other clue into inflation and the economy will come from next week’s October consumer price index report.
Corporate earnings season continued, with Qualcomm, Roku and Fortinet all falling sharply on disappointing quarterly results and forward guidance. Peloton‘s stock tumbled after reporting a wider-than-expected loss, while Moderna sank on a lowered Covid vaccine sales outlook.
For the week, all the key averages are on pace for losses, with the Dow down greater than 2%. The S&P and Nasdaq have shed 3.9% and 5.8%, respectively, week so far.
Correction: A previous version misstated the declines in Wednesday’s session.
