The Federal Reserve’s stance on the need for more aggressive interest rate rises was bolstered by an unexpectedly scorching inflation data, which caused U.S. markets to decline dramatically in early trade on Thursday.
By 63 points, or 1.8%, the S&P 500 fell to 3,513 as of 9:49 a.m. Eastern time. The Nasdaq composites dropped 2.4% and the Dow Jones Industrial Average dropped 413 points, or 1.4%.
The S&P 500 has dropped 26% so far this year, almost hitting a two-year low.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, projected that the Federal Reserve will increase rates by 75 basis points (bps) next month and that there was now a chance that they may do it again in December.
The Federal Reserve is dedicated to containing “unacceptably high” inflation, as shown by the minutes from its most recent meeting, which were made public on Wednesday.
A hawkish response to the data “may put extra pressure to markets,” according to a report by Anderson Alves of ActivTrades.
Data on retail sales for September, which will be made public on Friday, may provide a better sense of where prices are trending and how Americans are responding.
In order to combat inflation, which is at multidecade highs, the Fed and other central banks in Europe and Asia have hiked rates by unusually large percentages. However, traders are concerned that this move might push the global economy into recession.
Bill Adams, chief economist at Comerica Bank, said in a research that “although inflation is still much too high and core inflation is at a new generational high, the Fed is unlikely to raise the increment of its rate rises.”
Following the release of its $695 million third-quarter earnings, Delta Air Lines’ shares increased more than 4% in premarket trading. According to Atlanta-based Delta, increased fuel prices were more than offset by higher summertime average fares and a successful credit card operation. The airline predicted that sales would surpass pre-pandemic levels in the year’s last three months.
Dollar retreats a little
On the New York Mercantile Exchange’s computerized trading platform, benchmark U.S. crude increased 13 cents to $87.40 a barrel in the energy sector.
After reaching a 24-year high of 145.85 on Wednesday, the dollar dipped down to 146.68.
Because of the Fed’s rate increases and concerns about a recession, the value of the dollar has been increasing relative to other currencies. Because of the yen’s decline, there have been predictions that Japan’s central bank may intervene once again to support the currency rate after intervening in September.