Dow falls more than 300 points as Powell fails to ease rate fears, Nasdaq goes negative on the year
U.S. stocks fell sharply on Thursday after Federal Reserve Chair Jerome Powell failed to reassure investors that the central bank would keep surging bond yields and inflation expectations in check.
The S&P 500 closed the wild session down 1.3% to 3,768.47 after dropping 2.5% at its session low. The Dow Jones Industrial Average slid 345.95 points, or 1.1%, to 30,924.14. At one point, the blue-chip benchmark tumbled more than 700 points. The Nasdaq Composite fell 2.1% to 12,723.47 as growth stocks led the declines amid rising rates. Tesla shares dropped nearly 5%.
With Thursday’s steep sell-off, the Nasdaq turned negative on the year with a 1.3% loss. The tech-heavy benchmark also fell into correction territory on an intraday basis, down more than 10% from its recent 52-week high.
Powell said the economic reopening could “create some upward pressure on prices,” reiterating that the central bank would be “patient” before changing policy even as it saw inflation pick up in what it expects would be a transitory fashion.
The Fed chief did acknowledge the rapid rise in rates recently caught his attention, but said the Fed would need to see a broader increase across the rate spectrum before considering any action, he said during the Wall Street Journal Jobs Summit Thursday.
Some investors may have been disappointed that Powell didn’t make a strong hint of any changes in asset purchases by the Fed to contain the rapid increase in rates seen lately. Expectations were growing the Fed might implement an “Operation Twist” operation like it has done in the past where it sells short-term bills and buys longer-duration bonds.
On the data front, investors digested a better-than-expected reading on weekly jobless claims. First-time filings for unemployment insurance in the week ended Feb. 27 totaled 745,000, a touch below the Dow Jones estimate of 750,000, the Labor Department reported Thursday.
“We’re back to good news (for the economy) is bad news (for the market) and as interest rates move higher on expectations of better economic growth it has been hurting the stock market,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in a note.
Some believe additional stimulus measures could inject optimism into the market. The Senate is currently debating the $1.9 trillion relief package passed by the House on Saturday. President Joe Biden has backed a plan to cut the income caps for Americans to receive stimulus checks.
Reference: CNBC
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