- The Fed increases by 75 basis points
- US private sector payroll rises more than expected
- Powell says the Fed is not about to take a break
- Dow down 1.55%, S&P 500 down 2.50%, Nasdaq down 3.36%
NEW YORK, Nov 2 (Reuters) – U.S. stocks ended sharply lower on Wednesday as comments from Fed Chairman Jerome Powell shattered initial optimism over a Fed policy statement that raised interest rate by 75 basis points, but signaled that smaller rate hikes could be on the cards. horizon.
During a volatile trading session, stocks initially rose in the wake of the hike by the Fedthe fourth straight increase by the central bank of this magnitude as it attempts to bring down stubbornly high inflation.
The target federal funds rate was set in a range between 3.75% and 4.00%, but the impact of the hike was initially tempered by new language suggesting the central bank was aware of the effect its outsized rate hikes have had on the economy.
Investors had widely anticipated a 75 basis point rate hike, while hoping the Fed would signal its willingness to start tapering rate hikes at its December meeting.
However, comments from Fed Chairman Jerome Powell that it was “very premature” to consider suspending rate hikes sent stocks tumbling.
“It’s a speech, maybe it’s a moment of frustration. I don’t think he should have done it the way he did. But I understand why he did it, and in the together it’s doing the right thing right now,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
“At the end of the day, it will be good for the economy and good for the market.”
The Dow Jones Industrial Average (.DJI) fell 505.44 points, or 1.55%, to 32,147.76, the S&P 500 (.SPX) lost 96.41 points, or 2.50%, to 3,759.69 and the Nasdaq Composite (.IXIC) fell 366.05 points, or 3.36%, to 10,524.80.
After a strong rally in October that saw the Dow Industrials post its biggest monthly percentage gain since 1976 and the S&P rally around 8%, Wall Street’s three major indices have not fallen for three consecutive sessions. Wednesday’s decline was the largest percentage decline in the S&P 500 since Oct. 7.
The S&P 500 was slightly lower before the policy announcement, as the ADP National Employment Report showed that the US private sector payroll rose more than expected in October, giving the Fed more reason to continue an aggressive path of rate hikes.
The private payroll report came on the heels of Tuesday’s data which showed a jump in monthly job postings in the United Statesindicating that the demand for labor has remained strong.
Investors will get more labor market insights in the form of initial weekly jobless claims on Thursday and the October payrolls report on Friday, which will help fuel expectations for higher interest rates. .
Volume on U.S. exchanges was 12.80 billion shares, compared to an average of 11.57 billion for the full session over the past 20 trading days.
Falling issues outnumbered rising ones on the NYSE by a ratio of 3.38 to 1; on the Nasdaq, a ratio of 2.81 to 1 favored the decliners.
The S&P 500 posted 22 new 52-week highs and 20 new lows; the Nasdaq Composite recorded 108 new highs and 203 new lows.
Reporting by Chuck Mikolajczak; Editing by Cynthia Osterman
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