Main menu

Pages

Stocks slide as Fed hikes by 0.75%, Powell pushes back against pivot

featured image

US stocks slide in volatile trading Wednesday afternoon following a move by the Federal Reserve to raise its benchmark policy rate by 75 basis points for a fourth straight time — on par with market expectations — and remarks by Chair Jerome Powell indicating the US central bank was unlikely to shift on policy any time soon.

The S&P 500 (^GSPC) tumbled 1.2%, while the Dow Jones Industrial Average (^DJI) erased 200 points, or 0.6%. The technology-heavy Nasdaq Composite (^IXIC) rolled down 1.7%.

Stocks initially rose following the announcement but lost momentum after Powell in his post-meeting press conference refuted the idea of ​​a policy pivot in the near future, asserting it is “premature” to think about a pause on rate hikes. Powell said the Fed still had a “ways to go” and suggested that “the ultimate level of interest rates will be higher than previously expected.”

“The November FOMC meeting is not about the November policy rate decision,” Bank of America analysts led by Michael Gapen said in a recent note to clients. “Instead, the meeting is about future policy rate guidance and what to expect in December and beyond.”

Any signals from the central bank on a potential easing in the pace of tightening would serve as a tailwind for the major indexes, which closed last month higher on expectations of a policy pivot stoked by chatter from some officials suggesting a scale back of rate increases and global concerns that tightening may trigger financial instability. But some strategists have pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and payrolls still elevated.

“As of now, the inflation and labor market criteria have not been met, so Mr. Powell can’t pre-announce any intention to shift to slower rate increases without contradicting what he said just six weeks ago,” Pantheon Economics Chief Economist Ian Shepherdson said in emailed comments. “Evidence of fading pressure in the pipeline is abundant, but it is yet to hit the numbers which the Fed Chair has said clearly on multiple occasions matter most, namely, the actual core inflation data.”

WASHINGTON, DC - OCTOBER 03: US Federal Reserve Board Chairman Jerome Powell listens during a meeting with the Treasury Department's Financial Stability Oversight Council at the US Treasury Department on October 03, 2022 in Washington, DC.  The council held the meeting to discuss a range of topics including climate-related financial risk and the recent Treasury report on the adoption of cloud services in the financial sector.  (Photo by Anna Moneymaker/Getty Images)

WASHINGTON, DC – OCTOBER 03: US Federal Reserve Board Chairman Jerome Powell listens during a meeting with the US Treasury Department on October 03, 2022 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)

On the economic data front, US private payrolls saw an unexpected increase in October, per the ADP’s national employment report, which serves as an imperfect curtain-raiser for the government’s monthly jobs report due out Friday. Wednesday data suggests the labor market remains tight despite the Fed’s efforts to tamp down growth in its fight against inflation, suggesting aggressive rate hikes may continue.

And in corporate news, shares of Estée Lauder (EL) sank more than 7% after the company slashed its full-year forecast. The cosmetics maker cited currency headwinds, lockdowns in China, and some US retailers taking its cosmetics and fragrances off of their shelves amid worries of slowing demand.

Paramount (PARA) shares fell as much as 12% after the company reported a hit on profit over investments in content and said weakness in advertising revenue also weighed on the quarter.

Advanced Micro Devices (AMD) shares gained 3% after the chipmaker reported better-than-feared earnings results, even as fourth quarter revenue guidance fell short of Wall Street estimates.

The dating app Tinder is shown on a mobile phone in this picture illustration taken September 1, 2020. Picture taken September 1, 2020. REUTERS/Akhtar Soomro/Illustration

The dating app Tinder is shown on a mobile phone in this picture illustration taken September 1, 2020. Picture taken September 1, 2020. REUTERS/Akhtar Soomro/Illustration

Tinder, Hinge, and OkCupid owner Match Group (MTCH) shares advanced 5% after financials showed revenue that beat analysts’ estimates and the company vowed to control costs to prepare for a dimmed economic expectations.

Mondelez International (MDLZ) shares advanced 2% in after the Oreo-maker lifted its full-year outlook on sales and profit and indicated shoppers have continued to indulge on snacks and beverages despite inflation’s pinch.

Meanwhile, shares of Airbnb (ABNB) fell nearly 10% after the company warned of slowing fourth-quarter growth as consumers sour on higher cost rentals and favor urban and cross-border destinations.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

Click here for the latest trending stock tickers from the Yahoo Finance platform

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for Apple gold android

Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedInand Youtube

https://bigger.ga/stocks-slide-as-fed-hikes-by-0-75-powell-pushes-back-against-pivot/

Commentaires