Wall Street falls sharply after Powell’s remarks

The actions of Wall Street closed sharply lower on Wednesday, as comments from the Federal Reserve chairman (Fed), Jerome Powelldashed early optimism over a Fed statement that raised interest rates by 75 basis points, but signaled smaller hikes may be on the horizon.

In a volatile trading session, stocks initially strengthened on the back of the Fedthe central bank’s fourth consecutive hike of that magnitude as it seeks to curb stubbornly high inflation.

The Fed’s interest rate target was set in a range between 3.75% and 4.00%, but the impact of the hike was tempered by new language that suggested the central bank was aware of the effect its huge rate hikes had had in the economy.

Investors widely anticipated a 75 basis point rate hike as they waited for the Fed to show signs of starting to taper rate hikes at its December meeting.

However, comments from Powell that it’s “too premature” to think about pausing rate hikes, sent stocks down sharply.

“Maybe it’s a frustrating moment. I don’t think he should have done it the way he did, but I understand why he did it and in the big picture, he’s doing the right thing at the moment,” Stephen Massocca said. , senior vice president of Wedbush Securities in San Francisco.

“Ultimately, this will be good for the economy and the market.”

The S&P 500 lost 96.41 points, or 2.50%, to finish at 3,759.69 points, while the Nasdaq Composite it lost 366.05 points, or 3.36%, to 10,524.8 units. The Dow Jones Industrial Average it fell 505.44 points, or 1.55%, to settle at 32,147.76 points.

The S&P 500 had been down before the announcement, as ADP’s national employment report showed US private payrolls rose more than expected in October, giving further reason for the Fed to continue on an aggressive path of rate increases.

The private payroll report came on the heels of Tuesday’s data showing a jump in monthly US job openings, indicating job demand remained strong.

Investors will get more information about the labor market when the weekly initial jobless claims are released on Thursday and the October payroll report on Friday, which will help boost expectations of interest rate increases.

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