Dow plummets after Fed’s Jerome Powell fuels fears of rate hike

Federal Reserve Chairman Jerome Powell in Congress Central banks likely need to raise interest rates more than expected In response to recent strong data.

In intraday trading, the Dow Jones Industrial Average fell 354 points (1.1%) to 33,036, the Nasdaq was down 0.8% and the S&P 500 was down 1.1%.

The Fed is ready to take “bigger steps” if the “total” of incoming information suggests that tougher measures are needed. control inflationPowell told lawmakers.

His remarks were the first since inflation unexpectedly spiked in January and the government reported an unusually large increase in payroll jobs that month.

Traders significantly increased bets on a 50 basis point rate hike in March after Powell’s remarks. Financial market futures showed him more than a 40% chance from 23% before the statement.

Meanwhile, the Federal Reserve’s funding rate was seen to have peaked at 5.56% in September compared to 5.47% earlier.

“Powell is repeating what we already know, but he’s not saying anything dovish, and the market is looking at the Fed’s next move: how many rate hikes are due and how much. We’re a little nervous about whether we’re going to keep term rates,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Two-year Treasury yields, which best reflect short-term rate expectations, bounced back to 4.96%, the highest since 2007, as the tech-heavy Nasdaq weighed on.

Higher bond yields tend to weigh on stock valuations, especially growth and technology stocks, because higher interest rates reduce the value of future cash flows.

Investors await data later this week expected to show a 200,000 increase in nonfarm payrolls in February, compared to a much higher-than-expected 517,000 jobs reported in January. I’m here.

Horizon’s chief investment officer Scott Radner said, “A 50 basis point hike at our next meeting is possible, but only if labor cost growth hasn’t slowed and our disinflation progress has stalled. It will depend on the CPI figures that show that there is.” investment.

Individual stocks fell 10.5% after electric car maker Rivian Automotive announced plans to sell $1.3 billion worth of bonds.

Meta platform has since risen 2% Bloomberg News reported The company will cut thousands of jobs in new layoffs this week.

Snap, the owner of Snapchat, said Senator Mark Warner had announced that a bipartisan group of 12 senators would introduce a bill giving Commerce Secretary Gina Raimond new powers to ban the Chinese-owned video app TikTok. After that, it rose 6.4%.

Dick’s Sporting Goods rose 9.9% after more than doubling the retailer’s projected annual profit and quarterly dividend, beating Wall Street estimates.