Wall Street falls sharply on expectations of more Fed rate hikes in 2023

Major US stock indexes closed sharply lower on Thursday as fears intensified that the battle for the Federal Reserve (Fed) against inflation through aggressive interest rate increases could lead to a recession.

Each of the major US averages suffered their biggest daily percentage drop in weeks.

The US central bank raised rates by 50 basis points (bp) on Wednesday, thus halting four consecutive increases of 75 bp, although the president of the FedJerome Powell, said that recent signs of weakening inflation have not yet given confidence that the battle has been won.

The monetary policy committee of the Fed It planned to continue raising rates until they were above 5% in 2023, a level not seen since the deep economic recession of 2007.

“It’s not just what they did, but what they said, and it certainly sounds like they’re still worried about inflation and this won’t be the end of the rate hikes,” said Melissa Brown, Qontigo’s global head of applied research. In New York.

Adding to concerns about the global recession, the bank of england and the European Central Bank they signaled on Thursday that they will continue with an extended cycle of increases. Most of the major central banks have followed a strategy of raising rates in an attempt to control inflation.

The Dow Jones Industrial Average fell 764.13 points, 2.25%, to 33,202.22 units, while the S&P 500 he lost 99.57 points, or 2.49%, to finish at 3,895.75 points. The Nasdaq Composite it lost 360.36 points, or 3.23%, to settle at 10,810.53 units.

The 11 main sectors of the S&P 500 They were in the red, with communication services and technology stocks falling nearly 4% for the worst performance of the session.

Money market participants are currently expecting at least two 25 basis point rate hikes next year and borrowing costs to peak at 4.9% in the first half, before falling to around 4.4% at the end of year.

Stocks have staged a rally since hitting 2022 lows in October on hopes of a Fed less aggressive, but the rally stalled in December due to mixed economic data and worrying business forecasts.

Investors also scrutinized economic data on Thursday that showed a steeper-than-expected decline in retail sales in November and a drop in the number of Americans applying for sunemployment benefits last week, indicating a tight labor market.

Netflix Inc backed down after a media report that the company would let its advertisers get their money back after missing viewership targets.

Nvidia Corp fell after HSBC Global Research began covering the chipmaker’s shares with a “reduced” rating.

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