Nov. 2 (UPI) — U.S. stocks fell sharply Wednesday after the Federal Reserve announced another large interest rate hike, sending markets on a roller-coaster ride.
Markets initially climbed after the Federal Open Market Committee approved a much-anticipated 0.75 percentage point increase to the federal funds rates, but fell as Federal Reserve Chairman Jerome Powell struck a persistently hawkish tone during an afternoon news conference.
The Dow Jones Industrial Average was up about 200 points during trading before closing down 505.44 points, or 1.55% at 32,147.76. The S&P 500 fell 96.41 points, or 2.5%, to 3,759.69, and the Nasdaq Composite tumbled 366.05 points, or 3.36% to 10,524.8.
“The tone of Fed Chair Jay Powell’s comments was quite hawkish, which means the Fed still has a way to go to fight inflation, and the level of interest rates will be higher than previously expected, said Jack McIntyre, portfolio manager at Brandywind Global, according to CNBC.
Tech stocks continued to take a beating Wednesday, following last week’s disappointing earnings reports. Shares of Amazon fell 4.83%, Netflix dropped 4.8%, Meta declined 4.89%.
Wednesday’s disappointing close follows a strong month for stocks in October, when the Dow Jones climbed 14%, the S&P 500 rose 8% and the Nasdaq gained 3.9% amid hope that the Federal Reserve may start easing monetary policy.
“Woah! If you’re the kid in the back asking if we are nearly there yet and Dad says we have a ways to go then you buckle in for a journey,” said Rob Waldner, chief fixed income strategist at Invesco, according to the New York Times. “I was struck by that.”
Wednesday’s interest rate hike — the sixth increase since March and the fourth at 75 basis points — brought the federal funds rate to a target range of 3.75% to 4% in an ongoing effort to fight inflation.
The federal funds rate is the interest rate banks charge one another for overnight lending, which trickles down, affecting the economy in all sorts of ways, including how much banks charge consumers for things like mortgages, auto loans and credit cards.
Efforts to cool the economy haven’t been reflected in economic data, which remains strong. On Wednesday, ADP reported that private-sector employers added 239,000 jobs in October, 7.7% higher than a year ago.
Powell said the likelihood of slowing inflation without entering a recession has narrowed but is still possible.
Luke Bartholomew, senior economist at British global investment company abrdn, expressed skepticism for a soft landing.
“We continue to think that this balancing act will prove too difficult for the Fed to manage, and that this tightening cycle is very likely to end in a recession,” he said, according to Yahoo Finance.
Danish shipping giant Maersk warned Wednesday of a looming global recession. Shares of the company fell 7.38% Wednesday and are down 35% for the year.
Customer demand is weakening and ocean freight volumes are down, CEO Søren Skou told CNN, adding that consumptions is “weighed down by very, very negative sentiment.”
“I’m not a macroeconomist, but I would be surprised if Europe is not in recession by now,” with the United States following “sometime next year,” he said.
