June 30, 2022

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Dow closes below 30,000 as post-Fed rally reversals

Dow closes below 30,000 as post-Fed rally reversals

US stocks fell on Thursday, with the Dow Jones Industrial Average closing below 30,000 for the first time since January 2021 with volatility. continued to shake the market.

Major indices recorded significant declines in 2022 with rising inflation, high interest rates Rising concerns about corporate earnings and economic growth have also dampened investors’ appetite for risk. Blue chips are down 18% this year, the S&P 500 is down 23% and the heavy Nasdaq Composite is down 32%.

Stores crowd Wednesday After Federal Reserve Chairman Jerome Powell suggested that a 0.75 percentage point interest rate increase for the central bank this week would not become commonplace. Thursday This optimism is goneStocks fell across the market.

The S&P 500 Index is down 3.2%, while the Dow Industrial Index is down 2.4%, or 741 points, to 29,927. The last time the Dow closed below this milestone was on January 29, 2021. The Nasdaq Composite fell 4.1% with Big tech stocks. to retreat.

“I think the markets are reassessing the market environment,” said Michael Sheldon, chief investment officer at investment advisory firm RDM Financial Group. “The outlook for growth, earnings and inflation, at least for the next few months, is not favourable, unfortunately.”

The Fed’s rate increase of 0.75 percentage points was Bigger since 1994 But it is in line with investor expectations as the central bank races to tame high inflation. The latest data showed consumer price inflation in May Reached its highest level In more than four decades.

Mr. Powell said That while the central bank is not trying to cause a recession, it is becoming more and more difficult to achieve The so-called soft landing, where the economy slows enough to curb inflation without entering a recession. Some analysts said investors are coming to terms with it Increased risks to economic growth.

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I think that’s the realization that we could really head into a recession. “I’m not sure this has penetrated the mind of the market yet,” said Altaf Kassam, head of investment strategy for EMEA at State Street Global Advisors.

Federal Reserve Chairman Jerome Powell said the central bank’s goal is to bring inflation down to 2%. The Federal Reserve approved a 0.75 percentage point interest rate increase on Wednesday, the largest rate increase since 1994. Photo: Elizabeth Frantz/Reuters

If the Dow Jones Industrial Average closes below 30,000, it could affect the mood of investors who are used to rising stocks.

said Carol Schleif, Deputy Director of Investments at BMO Family Office.

Shares tumbled across the board Thursday, with each of the S&P 500’s 11 sectors down on the day. The energy group, the only sector in positive territory for 2022, lagged the market with a decline of 6.1%.

Big tech stocks also fell, with Microsoft Shares fell 2.7%, Amazon Shares fell 3.7% and nvidia Share prices fell 5.6%.

Twitter Shares lost 1.7 percent after that Tesla chief executive officer Elon Musk Address Twitter employees At the company’s meeting Thursday on topics including whether there will be layoffs if he completes his planned acquisition.

TeslaAnd the

that Raising the prices of some of its cars Amid rising costs, it fell 8.5%.

While Mr. Powell suggested on Wednesday that an “unusually large” rate hike would not become popular, he left the door open for another 0.75 percentage point increase as soon as next month.

Ovin Devitt, chief investment officer at Moneta, said interest rate increases of this magnitude could upset investors if they feel the Fed is racing too quickly to outpace inflation. “This could lead to more market anxiety,” she said.

The Swiss central bank surprised investors by raising interest rates for the first time in 15 years. The Swiss National Bank raised the interest rate by 0.5 percentage point to negative 0.25%, leaving only

Bank of Japan

One of the major central banks in the advanced economy is not raising interest rates to tame inflation. Economists had expected the Swiss National Bank to leave interest rates unchanged.

“This is the last hurdle to fall,” said Sima Shah, chief strategist at Principal Global Investors. “If we’re getting central banks deemed perpetually pessimistic about raising interest rates, there’s no denying that there’s a huge inflation problem in the global economy.”

Bank of England on Thursday Raised the key interest rate As expected to 1.25% from 1%, marking its fifth step in the largest number of meetings, he said that larger moves may be needed to tame inflation.

weekly Unemployment Claims Data It showed that 229,000 Americans applied for unemployment benefits in the week ending June 11. The labor market has been a strength area for the economy, but Federal Reserve officials point to weak employment numbers It may be a necessary consequence Central bank efforts to control inflation.

Return on a 10-year benchmark US Treasury Department The note fell to 3.303% from 3.389% on Wednesday. Treasury yields, which move in the opposite direction to prices, help set prices on a variety of consumer products including mortgages and auto loans.

Bitcoin It fell 3% from the 5 pm ET level on Wednesday to $21,041, according to CoinDesk, putting it on track for a drop to The tenth day in a row. Cryptocurrencies have been exposed to widespread economic concerns harming risky trades, concerns about selected projects and Companies in the crypto ecosystem. Investors in the cryptocurrency lending network Celsius are unlikely to provide the company with more funding that might save the company, The Wall Street Journal reported Thursday.

In the commodity markets, Brent crude, the international oil standard, rose 1.1% to $119.81 a barrel. Gold prices rose 1.7%.

Overseas stocks fell. The pan-continental Stoxx Europe 600 was down 2.5%. In Asia , Hang Seng In Hong Kong, it fell 2.2%, while Japan’s Nikkei 225 added 0.4%.

Stocks on Wall Street fell after a rally on Wednesday following the Federal Reserve’s interest rate decision.


picture:

Justin Lin/Shutterstock

Write to Karen Langley at karen.langley@wsj.com and Will Horner at william.horner@wsj.com

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