Following two days of falls, Wall Street stocks are sliding rapidly as investors fret that the Federal Reserve’s anti-inflation efforts would result in persistently high interest rates.
After opening higher on Tuesday morning, all three major indexes retreated sharply to the downside. The benchmark S&P 500 index fell 39 points, or 1%, to 3,991 at 11:27 EST. The Dow Jones Industrial Average sank 0.9%, while the technology-focused Nasdaq fell 1.0%.
Since Federal Reserve Chairman Jerome Powell suggested on Friday that the U.S. central bank will continue to a plan of rate hikes to combat multi-decade high inflation, the markets have been roiled. This looked to put an end to rumors the Fed may soften monetary policy in response to signals of a slowing economy.
06:54 A White House aide speaks in on the Federal Reserve alert
Some stocks defied the trend on Tuesday, including Best Buy, which surged 2.7% after announcing considerably better-than-expected profits for its most recent quarter. This contributed to a rise in the stock values of other retailers.
The decline of energy firms paralleled the price of crude oil.
Fed is determined to reduce inflation.
According to a report by Chris Turner of ING, a decline in the stock market and a decline in consumer spending are insufficient to derail the Fed’s tightening policy.
Investors are concerned that rate hikes by the Federal Reserve and central banks in Europe and Asia could derail global economic expansion.
Fed policymakers cite the robust U.S. labor market as proof that the world’s largest economy can withstand higher borrowing prices. Some admit the possibility of a recession, but argue that it may be required to combat soaring inflation.
This year, the Fed has hiked interest rates four times. The most recent two were by 0.75 percentage points, which is three times the margin of error.
Some investors had hoped the Fed will loosen monetary policy if inflation declines. This mood resulted in a stock market rise in July and early August.
As a result of weaker-than-anticipated July retail sales, investors anticipate another major rate hike at the Federal Reserve’s September meeting; nevertheless, the possibility of such a large increase is diminishing.
The Fed’s favored measure of inflation slowed last month, and consumer spending also dropped, according to further statistics. This week, Wall Street will receive many further economic updates.
During electronic trading on the New York Mercantile Exchange, the price of U.S. crude fell $2.89 per barrel to $94.12 per barrel. On Monday, the contract rose $3.95 to $97.01. Brent crude, the international benchmark price, fell $2.92 to $101.01 per barrel in London. It rose $4.10 during the previous session to reach $105.09.