US stocks see worst day this year as Fed rate hike rattles investors

theguardian.com:

US stock markets suffered their worst day of the year on Thursday as investors worried about the Federal Reserve’s plans to raise interest rates and tackle soaring inflation.

The Dow Jones Industrial Average lost over 1,000 points (3.1%). The S&P 500 and Nasdaq Composite fell 3.5% and 4.9%, respectively. Tech stocks were particularly hard hit with Amazon dropping 7.6% and Tesla falling 8.3%.

The steep fall came one day after the Fed chair, Jerome Powell, announced the sharpest rise in interest rates in over 20 years. With inflation now running at an annual rate of 8.5%, a 40-year high in the US, Powell said the Fed needed to do “everything we can to restore stable prices”.

The half percentage point increase in rates had been widely signaled and Powell’s comments that the Fed was not considering raising interest rates by 0.75 percentage points at a future meeting were initially welcomed by Wall Street, with stock markets recording their biggest one-day gain since 2020. But those gains evaporated on Thursday as traders worried about the impact of the Fed’s moves on demand and the wider economy.

“The Fed is between a rock and a hard place, and because of instant information, investors are experiencing both fear and greed at the exact same moment,” said Sam Stovall, chief investment strategist at CFRA. “Investors realized that by the Fed continuing to take a very measured approach, it could actually allow inflation to remain out of control.”

The Fed’s aggressive shift to raise interest rates has investors worrying about whether it can pull off the delicate dance to slow the economy enough to halt high inflation but not so much as to cause a downturn. The pace and size of interest rate increases is being scrutinized closely on