Dow drops 200 points as Fed cut hopes of softer tightening

Stocks fell on Thursday, taking advantage of Wednesday’s losses after the Federal Reserve raised its interest rate by another three-quarters of a point, and indicated that there will be no pivotal change or rate cut anytime soon.

The Dow Jones Industrial Average traded down 73 points, or 0.23%. The S&P 500 and Nasdaq Composite were down 0.64% and 1%, respectively.

Yield soared As traders digested the recent interest rate decision, adding pressure on stocks. The The yield on two-year Treasuries is the highest since July 2007 The benchmark 10-year Treasury yield rose 8 basis points to 4.141%.

“With Powell’s hawkish comments yesterday disappointing some and tipping the scenario to an initial rally, don’t be surprised to see more of the same volatility as investors digest the report and anticipate the Fed’s next steps,” said Mike Lowingart, Head of Model Portfolio. Construction at Morgan Stanley’s Global Investment Office.

Traders were expecting a 0.75 percentage point increase in the central bank rate and initially read the Fed’s statement as pessimistic. That initially sent stocks higher on Wednesday, but those gains were reversed when Fed Chair Jerome Powell said it was “too early” to discuss stopping the rate hike and that the final interest rate would likely be higher than previously reported.

“We still have some ways to go and the data from our last meeting suggests that the final level of interest rates will be higher than previously expected,” he said.

The Dow Jones Industrial Average ended Wednesday’s session 505 points, or 1.6%, down. The S&P 500 is down 2.5%, and the Nasdaq Composite is down 3.4%.

Markets will likely continue to swing until it is clear that inflation has calmed down and that the Fed has stopped raising interest rates, But traders are divided over interest rates are going. Any data showing that the US economy is not slowing down as the tightening central bank policy is likely to affect stocks.

“In our view, the risk-reward for the markets over the next three to six months is unfavorable, and today’s Fed statement supports that view,” Mark Heffel, chief investment officer at UBS, wrote in a note to clients on Wednesday.

Investors’ attention also turned to the October non-farm payrolls, due for release on Friday. A good job number and low unemployment rate, while good for the economy, could indicate more work ahead for the Fed.

Corporate earnings season continues, with QualcommAnd the Rocco And the fortinet All of them fell sharply due to disappointing quarterly results and forward guidance. pelotonStocks fell after Report a loss greater than expectedwhile Moderna sank Covid vaccine sales forecast low.

Correction: A previous version missed the drop in the Wednesday session.