All three benchmarks ended down more than 1.7%, with the Dow posting its lowest close since June 17, while the Nasdaq and S&P 500 posted their lowest levels since July 1 and June 30, respectively.
At the end of its two-day meeting, the Fed raised interest rates for the third time by 75 basis points to a range of 3.00% to 3.25%. Most market participants had expected such a rise, with just a 21% chance of a 100bp rate hike prior to the announcement.
However, policymakers also signaled more big hikes in new projections that show the key interest rate will rise to 4.40% by the end of this year, before peaking at 4.60% in 2023. This is an increase from June projections of 3.4% and 3.8% respectively.
Rate cuts are not scheduled until 2024, the central bank added, shattering any investor hopes that the Fed anticipated bringing inflation under control in the near future. The Fed’s preferred measure of inflation is now slowly returning to its target of 2% in 2025.
In his press briefing, Fed Chair Jerome Powell said that Federal Reserve officials are “determined” to bring inflation down from the highest levels in four decades and “will hold on to it until the job is done.” a process he repeated would not come without pain.
“Chairman Powell delivered a sobering message. He explained that nobody knows if there will be a recession or how hard it will be, and that it’s always difficult to achieve a soft landing,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
Higher interest rates and the fight against inflation also impacted the US economy, with Fed forecasts showing year-end growth of just 0.2% this year and rising to 1.2% in 2023.
“Markets were already set for some hawkishness based on inflation reports and recent governor comments,” BMO’s Ma said.
“But it’s always interesting to see how the market reacts to the messages. Hawkishness was to be expected, but while some in the market take comfort from that, others are taking a position to sell.”
The Dow Jones Industrial Average fell 522.45 points, or 1.7%, to 30,183.78, the S&P 500 lost 66 points, or 1.71%, to 3,789.93 and the Nasdaq Composite fell 204.86 points, or 1.79 % to 11,220.19.
All 11 S&P sectors ended lower, led by falls of more than 2.3% in consumer discretionary and communications services.
Volume on US exchanges was 11.03 billion shares compared to the average of 10.79 billion for the entire session over the last 20 trading days.
The S&P 500 posted two new 52-week highs and 70 new lows; the Nasdaq Composite posted 44 new highs and 446 new lows.
https://economictimes.indiatimes.com/markets/stocks/news/wall-street-slumps-as-investors-absorb-hawkish-fed-rate-message/articleshow/94361992.cms fed: Wall Street slumps as investors absorb hawkish Fed rate message