NEW YORK (AP) – Shares are tightly closed on Wall Street as worries grow in the markets the higher interest rate Federal Reserve uses to fight inflation will depress the economy and Dow plunges.
The S&P 500 fell 3.6%, cleared yesterday’s rally and marked its biggest loss in almost two years. The Dow is down by 1,063 points or 3.1%. Tech shares fell sharply, slowing Nasdaq down by 5%. Profits on the 10-year Treasury note have risen to 3.04%.
Growing yields are sure to put significant pressure on borrowing rates, which have been high since 2009.
Why are stocks declining?
“”Yesterday’s meeting was not based on fact and today’s big sale is a reversal of that unnecessary excitement,” said Ben Kirby, head of investment at Thornburg Investment Management.
Wall Street’s sad daily change reflects the level of uncertainty and uncertainty for investors due to the many threats facing the economy, starting with the highest inflation in the last 40 years, and the way the Federal Reserve is working to lower inflation. numbers by accumulating interest rates will be.
On Wednesday, the Federal Reserve announced a 5-point increase in the short-term interest rate.
Shares staggered following the move but then rose sharply as bond yields plummeted after Fed Chairman Jerome Powell reassured investors that the central bank was unlikely to switch to strong points, 3 per cent as the Fed continues to raise interest rates in the coming months.
But any relief Mr Powell offered gave stock investors a disappearance on Thursday. Shares fell and bond yields went up. Profits on the 10-year Treasury note have risen to 3.04%. Growing yields are sure to put significant pressure on borrowing rates, which have been high since 2009.
Investors are still concerned about whether the Fed can do enough to curb inflation without slowing down the economy, which is already showing signs of a slowdown. In addition to high inflation and rising interest rates, investors are faced with uncertainty over the ongoing supply chain disruption and political turmoil.
“The big problem is that there are a lot of moving parts and the unanswered question is how much as the Fed is trying to reduce inflation that will lead to a recession, and possibly even a recession,” said Terry Sandven, a senior equity strategist in the United States. U.S. Bank Resource Management
The Fed raises prices violently
The Fed’s strong shift in raising inflation makes investors worry about whether they can pull off a delicate dance to slow down the economy enough to stop inflation but not too much to cause a downturn. The speed and size of the interest rate hike are considered near Wall Street.
“Investors have realized that if the Fed continues to take a balanced approach, it could allow inflation to go unchecked; ” said Sam Stovall, CFRA’s chief investment strategy officer.
The Fed’s latest move to raise interest rates by half a point has been widely anticipated. Markets stabilized this week ahead of a policy review, but Wall Street was concerned that the Fed could choose to raise prices by three-quarters of its next point. Powell allayed the concerns, saying the central bank “does not” consider further “such an increase.
The banks on Dow plunges
The central bank has also announced that it will begin reducing its $ 9 trillion balance, which includes mainly Treasury and mortgage bonds, from June 1. That big money is a policy tool the Fed uses to maintain long-term interest rates, such as those. in debt, low.
When Powell said the Fed was not anticipating a significant increase in short-term inflation; that sent a signal to investors to send rising stock prices and bond yields declining. A slowdown in interest rates could mean less risk of a recession; as well as a lower pressure to lower all types of investments.
But lowering the chances of a 0.75-point increase does not mean that the Fed is being pushed; to raise prices gradually as it strives to reduce inflation, not even closing. Economists at BNP Paribas still expect the Fed to continue raising the organisation’s fiscal level; from 3% to 3.25%, from zero to 0.25% earlier this year.
“We do not think this was the intention of Chairman Powell,” wrote economists at BNP Paribas in the report; quoting market excitement on Wednesday, “and we think we could see the ‘Fedspeak’ coming to recreate the financial situation.”
The Bank of England on Thursday raised the bank’s interest rate to a record high in 13 years; the fourth highest rise since December as inflation in the U.K. continues for the top 30 years.
Read more: Dow, S&P, NASDAQ close higher this quarter
Technological stocks are smooth but energy is a bright spot for Dow plunges
Energy markets are still volatile as the conflict in Ukraine continues and demand remains high amidst solid oil reserves. European governments are trying to replace Russian power and are considering a ban. OPEC and the world’s oil-producing countries decided on Thursday; to gradually increase the number of pollutants they send to the world.
High oil and gas prices have had an impact on investors’ concerns as they try to assess; how inflation will affect businesses, consumer jobs and overall economic growth.
Homeowners are falling sharply as long-term mortgage rates rise. D.R. Horton fell 5.8%.
The average 30-year mortgage rate has risen to 5.27% this week; the highest rate since 2009, according to real estate lender Freddie Mac. Last year, it was estimated at 2.96%. Mortgage rates usually follow the Treasury’s 10-year yield movement. The sharp rise in mortgage rates has hampered mortgage lending after years of inflation of Dow plunges.