NEW YORK (Reuters) – U.S. stocks closed sharply lower on Wednesday, as comments by Federal Reserve Chairman Jerome Powell smashed initial optimism about the Federal Reserve’s policy statement that raised interest rates by 75 basis points but indicated that smaller rate increases may be in place. in the last period. horizon.
In a choppy trading session, stocks initially moved higher in the wake of the rally by the Federal Reserve, the fourth consecutive increase from the central bank of this size as it tries to bring down stubbornly high inflation.
The federal funds rate was set in a range of 3.75% to 4.00%, but the impact of the increase was initially mitigated by new language indicating that the central bank was aware of the impact that its massive rate increases were having on the economy.
Investors had been widely expecting a 75 basis point rate hike, while hopeful that the Federal Reserve would signal its willingness to start tapering rate hikes at its December meeting.
However, comments from Federal Reserve Chairman Jerome Powell that it was “too early” to consider pausing the rate hike, which sent stocks sharply lower.
“It’s one speech, perhaps 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 big picture of things, he was doing it,” said Stephen Masuka, senior vice president at Wedbush Securities in San Francisco. The right thing now.”
“Ultimately this will be good for the economy and good for the market.”
Dow Jones Industrial Average (.DJI) It fell 505.44 points, or 1.55%, to 32,147.76, the Standard & Poor’s 500 . (.SPX) It lost 96.41 points, or 2.50%, to 3759.69 points, and the Nasdaq Composite (nineteenth) It fell 366.05 points, or 3.36%, to 10,524.80 points.
After a strong October rally that saw the Dow Jones Industrial Average post its biggest monthly percentage gain since 1976, and the S&P 500 soaring about 8%, Wall Street’s three major indices haven’t fallen for three straight sessions. Wednesday’s drop was the biggest percentage drop for the S&P 500 since October 7.
The S&P 500 was slightly lower before the policy announcement, as the ADP national employment report showed private payrolls in the US increased more than expected in October, giving more reason for the Federal Reserve to continue the strong path of raising interest rates.
The private sector employment report came on the heels of data on Tuesday that showed a jump in monthly job opportunities in the US, indicating that demand for labor remains strong.
Investors will get more insights into the labor market in the form of weekly initial jobless claims on Thursday and the October payroll report on Friday that will help drive expectations for a rate hike.
Volume on US stock exchanges was 12.80 billion shares compared to an average of 11.57 billion for the full session over the last 20 trading days.
Low issues outnumbered advanced issues on the New York Stock Exchange by 3.38 to 1; On the Nasdaq, the ratio was 2.81 to 1 in favor of declining stocks.
The S&P 500 hit 22 new highs in 52 weeks and 20 new lows; The Nasdaq Composite recorded 108 new highs and 203 new lows.
(Reporting by Chuck Mikolajchak) Editing by Cynthia Osterman
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