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Wall Street slumps as investors absorb hawkish Fed rate message

Published 09/21/2022, 06:23 AM
Updated 09/21/2022, 06:36 PM
© Reuters. FILE PHOTO: A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., September 13, 2022. REUTERS/Andrew Kelly

By David French

(Reuters) - Wall Street's main indexes see-sawed before slumping in the final 30 minutes of trading to end Wednesday lower, as investors digested another supersized Federal Reserve hike and its commitment to keep up increases into 2023 to fight inflation.

All three benchmarks finished more than 1.7% down, with the Dow posting its lowest close since June 17, with the Nasdaq and S&P 500, respectively, at their lowest point since July 1, and June 30.

At the end of its two-day meeting, the Fed lifted its policy rate by 75 basis points for the third time to a 3.00-3.25% range. Most market participants had expected such an increase, with only a 21% chance of a 100 bps rate hike seen prior to the announcement.

However, policymakers also signaled more large increases to come in new projections showing its policy rate rising to 4.40% by the end of this year before topping out at 4.60% in 2023. This is up from projections in June of 3.4% and 3.8% respectively.

Rate cuts are not foreseen until 2024, the central bank added, dashing any outstanding investor hopes that the Fed foresaw getting inflation under control in the near term. The Fed's preferred measure of inflation is now seen slowly returning to its 2% target in 2025.

In his press conference, Fed Chair Jerome Powell said U.S. central bank officials are "strongly resolved" to bring down inflation from the highest levels in four decades and "will keep at it until the job is done," a process he repeated would not come without pain.

"Chairman Powell delivered a sobering message. He stated that no one knows if there will be a recession or how severe, and that achieving a soft landing was always difficult," said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

Higher rates and the battle against inflation was also feeding through into the U.S. economy, with the Fed's projections showing year-end growth of just 0.2% this year, rising to 1.2% in 2023.

"Markets were already braced for some hawkishness, based on inflation reports and recent governor comments," said BMO's Ma.

"But it's always interesting to see how the market reacts to the messaging. Hawkishness was to be expected, but while some in the market take comfort from that, others take the position to sell."

The Dow Jones Industrial Average fell 522.45 points, or 1.7%, to 30,183.78, the S&P 500 lost 66 points, or 1.71%, to 3,789.93 and the Nasdaq Composite dropped 204.86 points, or 1.79%, to 11,220.19.

All 11 S&P sectors finished lower, led by declines of more than 2.3% by Consumer Discretionary and Communication Services.

© Reuters. FILE PHOTO: A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., September 13, 2022. REUTERS/Andrew Kelly

Volume on U.S. exchanges was 11.03 billion shares, compared with the 10.79 billion average for the full session over the last 20 trading days.

The S&P 500 posted two new 52-week highs and 70 new lows; the Nasdaq Composite recorded 44 new highs and 446 new lows.

Latest comments

free market controlled by one man....
Truth of the matter is that he has to correct all the corruption from wallstreet and corporate america just like 2008. We the little guy will have to pay the price just like before. Once you understand the game, you will make money up or down.
LOL the US stock market is a circus and big money pulling strings in the background with journalism....its going red before close WHAT A JOKE!
Next time 100 bps..
Remember Remember the 8Th of November V😁
what is on 8th Nov ?
what is on 8th Nov ?
5th of November maybe?
Biden and Dems have got to go!!
What does the Fed have to do with the election? The fed is apolitical and makes its own impartial decisions.
The Fed monetary policy is reacting to Dems fiscal policies and inflation it's causing.
just use long stradle/strangle
SPY now is near opening price
just use long stradle/strangle
why market is falling,it is already expected
absolutely
Because the end game is now higher
why market is falling,it is already expected
God. if fed increase rate market will be up or down. just tell me . that's enough
I believe it will go down, it always does when they raise interest
In the short-term market will go up and down. In the longer-term this will occur in a descending channel until the bear market hits bottom.
That's actually completely wrong. Do you homework. smfh.
The Wall Street criminals keep the US Ponzi Scheme propped while they warm up the printers.  Can't start from a break-even or negative position at, can they?  The laughingstock of the investing world  continues to entertain the globe, schooling countries worldwide how to DEFRAUD a population in broad daylight.
Usa are prepared to enter recession…with this rate hike…the economy is in shambles
Really? By what measure? Employment? Wages? GDP?
From the perspective of Indian Markets. Nifty and Sensex seem to have factored in 100bps rate hike. Anything less then 100bps will allow Indian markets to rally. It will also depend heavily on Powell's speech later in the day.
From the perspective of Indian Markets. Nifty and Sensex seem to have factored in 100bps rate hike. Anything less then 100bps will allow Indian markets to rally. It will also depend heavily on Powell's speech later in the day.
From the perspective of Indian Markets. Nifty and Sensex seem to have factored in 100bps rate hike. Anything less then 100bps will allow Indian markets to rally. It will also depend heavily on Powell's speech later in the day.
pucker up, it's gonna happen.
can anyone help in explaining why they state a range in rate? For example article says 3.00 to 3.25 range, yet they say 75 basis points. How can there be a range if it is exactly 75 basis points? Are some banks getting 3.00 and some shafted with a 3.25 instead? TIA!
"the Fed adjusts two administered rates, interest on reserve balances and ON RRP, to keep the federal funds rate within the target range determined by the FOMC."
b/c 75 basis points is .75 & u add up all the basis point to get a range of 3.00 to 3.25.
Simplified answer would be because Fed rate can not be 0% even when it's at the lowest. So the lowest most recent was @ 0 to .25%. Therefore, had to issue range of rate instead of one decimal number.
difnetly Market down why because half of the world facing drought
not India 🇮🇳
What if they raise 0,50% instead?!
.75 points may be increased already factored
.75 points may be increased already factored
.75 points may be increased already factored
The US Ponzi Scheme opens green when it should be down another 1,000.  Another predictable day of fraud in the laughingstock of the financial world.  Must have a "rally" on FED day.  Will a "late trade" miracle "rally" allow the S&P to recapture 3,900?  Of course, the "market" has already "priced in" a 1 point hike, so watch the magic show when a .75 point hike is announced.  This "market" has become such a criminal joke that I can barely look at it.
why look at it then?
why are you so butthurt?
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