US stocks fell on Thursday as Wall Street reeled Interest rate hike again by Fed officials And assess similar moves by monetary policymakers across the Atlantic. A disappointing reading on consumer spending also weighed on sentiment.
The European Central Bank and the Bank of England The US Federal Reserve follows in raising interest rates by 50 basis points Thursday morning. The Bank of England raised rates in the country to their highest levels since 2008.
S&P 500 Index (^ The Salafist Group for Preaching and Combat(down 2.7% at midday, while the Dow Jones Industrial Average fell)^ DJI) lost more than 850 points, or 2.6%. Nasdaq Technology Heavy Composite (^ ix) fell more than 3%.
US Treasury yields fell, with the benchmark 10-year note dropping below 3.5%. The US dollar index is higher, and oil prices are lower, with West Texes Intermediate (WTI) crude futures trading around $76 a barrel.
European Central Bank President Christine Lagarde also repeated a hawkish tune from Fed Chair Jerome Powell following the monetary authority’s interest rate decision.
“Anyone who thinks this is the focus of the ECB is mistaken,” Lagarde told a news conference. “We should expect to raise interest rates by 50 basis points for a period of time.”
“We have more ground to cover, we have more time to go and play a long game,” she said.
Meanwhile, the government’s retail sales report Show spending fell sharply November is when the main holiday shopping season begins. The latest reading of retail sales showed a decrease of 0.6% compared to the previous month but an increase of 6.5% over the same period last year.
“Black Friday and holiday shopping weren’t enough to save retail sales last month, as they fell the most this year and came in well short of expectations,” Mike Lowengart, head of model portfolio creation at Morgan Stanley, said in a note.
He added, “The consumer has been resilient with rising inflation, but higher prices and talk of a recession may now have some second-guess access to their wallet.” “It’s been a busy week for investors with both the Federal Reserve and the European Central Bank raising interest rates, so it shouldn’t be surprising to see a shaky market.”
And while a slowdown in retail spending showed signs of economic weakness, another economic release released early Thursday confirmed continued malaise in the labor market. Unemployment insurance claims unexpectedly fell last week to their lowest level since September. Initial jobless claims, the latest timely snapshot of the US employment situation, came in at 211,000 for the week ending Dec. 10, a decrease of 11,000 from the previous week’s revised level, per Ministry of Labor data.
On the corporate front, Tesla (TSLAThe stock held steady Thursday after falling all week, even as CEO Elon Musk showed a regulatory filing It sold approximately 21,995,000 shares of the company’s stock, or approximately $3.6 billion, during the three-day period ended Dec. 14. Tesla shares are down about 20% in December so far and about 55% year-to-date after the sale of the electric car giant has accelerated in recent days.
Linnar shares (flexible) also rose after earlier losses after earnings from the homebuilder late Wednesday showed 11% jump in fourth-quarter earnings.
Thursday morning’s movements follow across major averages In the previous trading session after the Fed introduced a 50 basis point increase in its benchmark interest rate. Fed Chairman Jerome Powell also confirmed that he and his colleagues will continue to raise interest rates in 2023 to the expected upwardly revised final rate of 5.1%.
Wednesday’s half-percentage-point hike, which brought the federal funds rate to a range of 4.25%-4.5%, represented a slowdown from the 75 basis-point increases in Each of the past four policy meetings of the Federal Reserve Most ferocious rally since the 1980s.
Despite the slowdown in the pace and size of the increases, Powell has consistently emphasized that the work he and his colleagues have done to tackle stubbornly high inflation is far from over.
“Now that we’ve raised interest rates 425 basis points this year and we’re in constrained territory, it’s not so important now how fast we go — it’s very important to think, what’s the bottom line?” Powell said at a news conference with reporters on Wednesday. “At a certain point, the question will become, How long are we going to stay tied up?”
The Fed’s “dot plot,” which shows policymakers’ estimates for interest rates, projected that the federal funds rate would rise in 2023 to between 5.1% and 5.4% and in 2024 it would remain at an average of 4.1% from a previous estimate. 3.9% – the change that strategists point to as the biggest surprise revision to the central bank’s outlook.
“These estimates are significantly more hawkish than previously forecast and are not pre-tracked as is usually the case with the Federal Reserve,” William Blair macro analyst Richard de Chazal said in a note.
Christine Lagarde, President of the European Central Bank, echoed Powell’s sentiments at a news conference after the ECB announced a rate hike on Thursday.
“Anyone who thinks this is the focus of the ECB is wrong,” Lagarde said. “We should expect to raise interest rates by 50 basis points for a period of time.”
“We’ve got more ground to cover, we’ve got more time to go, and we’re playing a long game,” she said.
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Alexandra Semenova is a correspondent at Yahoo Finance. Follow her on Twitter @employee
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