U.S. stocks fell on Thursday as Wall Street reeled over claims by Federal Reserve Chairman Jerome Powell that hopes of a political pivot were ‘premature’ after the central bank made a fourth hike consecutive interest rates of 75 basis points.
The S&P 500 (^GSPC) fell 1.1% after the index plunged 2.5% in the previous session, its worst one-day loss from the Fed since January 2021, according to Bloomberg data. The Dow Jones Industrial Average (^DJI) lost 150 points, or 0.5%, and the technology-focused Nasdaq Composite (^IXIC) lost 1.7%.
Meanwhile, Treasury yields rose, with the main 10-year note nearing 4.2% and the rate-sensitive 2-year yield above 4.7%. The US dollar index also rose.
The S&P 500’s 2.5% loss on Wednesday marked its 54th drop of 1% or more in 2022 – the worst downside volatility since 2009, according to Charlie Bilello of Compound Advisors.
US investors also drew their attention to the action across the Atlantic, with the Bank of England following the Fed’s move, also raising interest rates by three-quarters of a percentage point.
Wednesday’s increase takes the Fed’s benchmark rate, the federal funds rate, to a new range of 3.75% to 4%, its highest level since 2008. While the move came in line with expectations, shares fell after Powell indicated officials could raise interest rates. above the previously estimated 4.6% – the signal for further tightening is certain, even after the policy statement, the implied hikes could be smaller.
“The market initially viewed November’s Federal Open Market Committee (FOMC) statement as dovish, but a hawkish press conference caused those moves to almost completely reverse due to comments that “the ultimate level of interest rates interest will be higher than expected” and it is “premature to think about suspending rate hikes,” said economists at Bank of America led by Michael Gapen.
The FOMC statement also acknowledged the lagged effects of cumulative monetary tightening, suggesting increased attention by the rate-setting group to concerns about economic growth.
Investors are now turning their attention to the all-important jobs report at 8:30 a.m. ET on Friday. Labor Department figures are expected to show a payroll gain of 190,000 for October, according to Bloomberg estimates. The print, if realized, would mark a decline in numbers seen throughout the pandemic recovery, but reflect still robust hiring, with pre-COVID payrolls averaging 150,000 to 200,000 per month.
Powell also said in his speech that “the labor market continues to be unbalanced, with demand far outstripping the supply of available workers.”
In corporate news, Elon Musk is reportedly planning to cut Twitter’s workforce (3,700 out of roughly 7,500 employees) by about half, according to a Bloomberg News report – just a week after it closed a extended offer to buy social media platform in $44 billion deal.
On the earnings side, shares of Qualcomm (QCOM) fell about 8% on Thursday after the smartphone chipmaker issued a forecast below estimates, citing macroeconomic headwinds and COVID lockdowns in China.
Shares of Roku (ROKU) fell 5% after the company warned of economic pressures and weak advertising sales, while also forecasting a bigger-than-expected loss for the current quarter.
Meanwhile, shares of Etsy (ETSY) rose nearly 15% after the online market reported third-quarter earnings that beat analysts’ expectations.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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