Stock market opens lower as post-Fed rally fades

U.S. global stock indexes tumbled, suggesting Wall Street’s recovery from the Fed meeting is unlikely to last.

The S&P 500 fell 2.2% in early trading Thursday, a day after the broad index rebounded 1.5% to end a five-day losing streak. The blue-chip Dow Jones Industrial Average lost 1.9% while the Nasdaq Composite Index fell 2.7%, putting tech stocks on course for steep losses after the opening bell.

Overseas, the pancontinental Stoxx Europe 600 index fell 2% with steep losses for rate-sensitive tech companies and economically sensitive retail stocks. In Asia, indices were more mixed, with Japan’s Nikkei 225 rising 0.4% while Hong Kong’s Hang Seng fell 2.2%.

Tech company stocks fell, with Nvidia,

Amazon and Microsoft each fall between 2% and 5%. Shares of Twitter were the exception, rising 1.4% after the Wall Street Journal reported that Tesla Chief Executive Elon Musk is expected to confirm he wants to buy the social media company when addressing to its employees on Thursday.

The Fed raised its benchmark rate by 0.75 percentage points on Wednesday, its biggest hike in nearly three decades, as it races to rein in runaway inflation. While the widely expected move prompted a rally on Wall Street as investors hailed efforts to rein in inflation, that optimism crumbled on Thursday as investors contemplated the danger posed to the economy after years of high rates. lows and tepid increases in consumer prices.

Federal Reserve Chairman Jerome Powell said the central bank’s goal was to reduce inflation to 2%. The Fed approved a 0.75 percentage point rate hike on Wednesday, the biggest interest rate hike since 1994. Photo: Elizabeth Frantz/Reuters

“I think it’s the realization that we could really be heading into a recession. I’m not sure that has really crossed the market’s mind so far,” said Altaf Kassam, head of the investment strategy for Europe, Middle East and Africa at State Street Global Advisors.

Fed Chairman Jerome Powell suggested on Wednesday that the “unusually large” rate hike would not become commonplace, but he left the door open for another 0.75 percentage point hike as early as next month.

Interest rate hikes of this magnitude could destabilize investors if they believe the Fed is running too fast to outpace inflation, said Aoifinn Devitt, chief investment officer at Moneta. “That can lead to even more anxiety in the market,” she said.

Losses accelerated after the Swiss central bank surprised investors by raising interest rates for the first time in 15 years. The Swiss National Bank raised its key rate by 0.5 percentage points to minus 0.25%, leaving only the Bank of Japan among the major central banks in developed economies to fail to raise rates to control inflation. . Economists expected the SNB to leave rates unchanged.

“This is the last hurdle to fall,” said Seema Shah, chief strategist at Principal Global Investors. “If we get the central banks that have been seen as permanently accommodative rate hikes, it’s undeniable that there is a huge inflation problem in the global economy.”

The Swiss franc jumped 2% against the dollar and 2.4% against the euro following this development. The WSJ Dollar Index, which measures the dollar against a basket of its peers, edged down 0.2%.

The Bank of England on Thursday raised its key interest rate as expected to 1.25% from 1%, marking its fifth move in as many meetings, and said bigger moves may be needed to get inflation under control . The British pound edged up 0.6% against the dollar following the move.

The yield on the benchmark 10-year U.S. Treasuries rose to 3.444% from 3.389% on Wednesday, resuming their rise that pushed yields to their highest levels in more than a decade. Treasury yields, which move in the opposite direction to prices, help set rates on a variety of consumer products, including mortgages and auto loans.

Bitcoin was down 2.4% from its 5 p.m. ET Wednesday level at $21,173, according to CoinDesk, putting it on track to fall for a 10th straight day. Cryptocurrencies have been hit by broad economic concerns that are hurting risky trades and worries about certain projects and businesses in the crypto ecosystem.

In commodities markets, Brent, the international oil benchmark, fell 0.7% to $117.67 a barrel. The price of gold rose 0.5%.

Weekly jobless claims data showed 229,000 Americans applied for jobless benefits in the week ended June 11. The labor market has been an area of ​​strength for the economy, but Fed officials have signaled that weaker employment numbers could be a necessary consequence of the central bank’s effort. to control inflation.

Wall Street stocks rose on Wednesday after the Federal Reserve’s interest rate decision.


Photo:

Justin Lane/Shutterstock

Write to Will Horner at [email protected]

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