US stocks fall after steep sell-off as investors assess outlook for more aggressive rate hikes to come

  • US stocks fell Thursday, setting up the major indexes for a third straight loss. 
  • The Federal Reserve's rate hike Wednesday was followed by rate hikes at other central banks. 
  • The Bank of Japan intervened in the currency market for the first time since the late 1990s. 

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US stocks edged lower Thursday after a steep selloff that followed the Federal Reserve's latest interest rate increase and its message that more rate hikes are in the pipeline as it fights high inflation. 

The SP 500, the Nasdaq Composite, and the Dow Jones Industrial Average could notch their third straight session of losses. The SP 500 dropped 1.7% on Wednesday after the Fed raised interest rates by 75 basis points for a third meeting in a row, pushing the fed funds target rate to between 3% and 3.25%. 

"We want to act aggressively now, and get this job done, and keep at it until it's done," Federal Reserve Chairman Jerome Powell said at Wednesday's press conference outlining the latest policy decision.

Here's where US indexes stood at the 9:30 a.m. opening bell on Thursday: 

  •   SP 500 : 3,783.51, down 0.17%
  • Dow Jones Industrial Average : 30,156.61, down 0.09% (27.17 points)
  • Nasdaq Composite : 11,194.44, down 0.23%

"Chairman Powell's remarks underscore a hawkish outlook of the US central bank for the balance of 2022 and beyond," sai Greg Bassuk, chief executive at AXS Investments, in emailed comments. "While monetary policy is a time-tested tool for curbing inflation, this rare, brisk, and aggressive pace of further rate hikes risks sparking higher unemployment, a recessionary economy, and other downstream negative impacts of over-tightening moves by the Fed." 

Other central banks including Switzerland and Norway followed suit with their own rate hikes as inflation burns hot throughout the global economy. The Bank of England raised its key rate by 50 basis points as inflation sits at 9.8%. 

The Bank of Japan, meanwhile, rocked the currency market by intervening to defend its slumping yen against the US dollar. The bank dumped dollars in its first intervention since 1998 after the greenback this year has soared more than 20% against the yen. 

US weekly jobless claims released Thursday rose slightly, by 5,000 to 213,000, but the labor market remains strong. 

The "Fed has made it abundantly clear that it wants a materially softer labor market, and we're not sure labor demand has slowed enough to bring that about without at least some increase in layoffs," wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. 

Here's what else is happening today:

  • "Bond King" Jeff Gundlach said the Fed's commitment to big rate hikes means a 75% chance of a US recession in 2023. 
  • Economist Mohamed El-Erian said the Fed could have avoided "higher, faster, longer lasting" rates and elevated recession risk if it had acted sooner. 
  • JPMorgan CEO Jamie Dimon called crypto "decentralized Ponzi schemes" in testimony before the House Financial Services Committee on Wednesday.

In commodities, bonds and crypto:

  • West Texas Intermediate crude gained 1.7% to $84.35 per barrel. Brent crude, the international benchmark, gained 1.5% at $91.19.  
  • Gold fell 0.1% to $1,681.10 per ounce. The 10-year Treasury yield rose 3 basis points to 3.56%.
  • Bitcoin rose 1.3% to $19,168.03. 
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Source: https://markets.businessinsider.com/news/stocks/stock-market-news-federal-reserve-inflation-economy-powell-dow-nasdaq-2022-9