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Nasdaq posts biggest daily drop since Feb after 'hawkish' Fed minutes

Stock Markets Jan 05, 2022 06:31PM ET
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© Reuters. FILE PHOTO: The Wall St. sign is seen outside the New York Stock Exchange (NYSE) in New York, U.S., December 17, 2019. REUTERS/Brendan McDermid
 
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By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks fell sharply on Wednesday, with the Nasdaq plunging more than 3% in its biggest one-day percentage drop since February, after U.S. Federal Reserve meeting minutes signaled the central bank may raise interest rates sooner than expected.

The S&P 500 fell more than 1%, its biggest daily percentage decline since Nov. 26, the first day of trading after news of the Omicron variant of the coronavirus.

The S&P 500 and Nasdaq quickly extended their declines after the release of the minutes, which investors viewed as more hawkish than they had feared. The Dow, which hit a record high earlier in the day, reversed course and ended down more than 1%.

The selloff was broad, with all S&P sectors ending in the red, and Wall Street's fear gauge, the Cboe Volatility index, closing at its highest level since Dec. 21.

In the minutes from the Fed's Dec. 14-15 policy meeting, central bank policymakers said a "very tight" job market and unabated inflation might require the Fed to raise rates sooner and begin reducing its overall asset holdings as a second brake on the economy.

"Indications that the Fed is very concerned about inflation could quickly create a view that the Fed will aggressively tighten in 2022," said David Carter, chief investment officer at Lenox Wealth Advisors in New York, calling the minutes "more hawkish than expected."

The S&P 500 technology sector fell 3.1% and was the biggest drag on the benchmark index, while the rate-sensitive real estate sector dropped 3.2% in its biggest daily percentage decline since Jan. 4, 2021.

The Dow Jones Industrial Average fell 392.54 points, or 1.07%, to 36,407.11, the S&P 500 lost 92.96 points, or 1.94%, to 4,700.58 and the Nasdaq Composite dropped 522.54 points, or 3.34%, to 15,100.17.

Rising interest rates increase borrowing costs for businesses and consumers, and higher rates can depress stock multiples, especially for technology and other growth stocks.

Growth shares have been under pressure from a recent rise in U.S. Treasury yields.

The Russell 2000 index also suffered its biggest one-day drop since Nov. 26, while the S&P 500 financials index fell 1.3%, a day after it registered an all-time closing high.

Policymakers in December agreed to hasten the end of their pandemic-era program of bond purchases, and issued forecasts anticipating three quarter-percentage-point rate increases during 2022. The Fed's benchmark overnight interest rate is currently set near zero.

Early in the day, an ADP National Employment report showed private payrolls increased by 807,000 jobs last month, more than double of what economists polled by Reuters had forecast.

The report comes ahead of the Labor Department's more comprehensive and closely watched nonfarm payrolls data for December on Friday.

Declining issues outnumbered advancing ones on the NYSE by a 4.32-to-1 ratio; on Nasdaq, a 4.22-to-1 ratio favored decliners.

The S&P 500 posted 59 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 81 new highs and 307 new lows.

Volume on U.S. exchanges was 12.18 billion shares, compared with the 10.4 billion average for the full session over the last 20 trading days.

Nasdaq posts biggest daily drop since Feb after 'hawkish' Fed minutes
 

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Comments (27)
Drew Bednar
Drew Bednar Jan 06, 2022 12:09AM ET
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Like the Hawishness of the Fed was not expected. They might as well lay some dam cards on the table already. Most financial experts already feel that a quarter pt rate hike should have occurred already but inflation was only transitory. No worries prices will normalize and come down..... yaaa when we finally have a recession.
F J Brooks
F J Brooks Jan 05, 2022 9:25PM ET
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Any prediction for tomorrow?
V E SKYLINE
V E SKYLINE Jan 05, 2022 9:25PM ET
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yeah fresh all time highs
F J Brooks
F J Brooks Jan 05, 2022 9:18PM ET
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Were you guys see in real time all this news in real time? like when Powell speak?
Al Ose
Al Ose Jan 05, 2022 9:16PM ET
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2 days ago i posted nasdaq was about to sell off 5%. Got down voted. The only time in my life i was actually right.
Boner Uncle
Boner Uncle Jan 05, 2022 8:55PM ET
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trump
Joel Schwartz
Joel Schwartz Jan 05, 2022 8:55PM ET
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Is going to prison and $DWAC is going to zero
Sattar Langary
Sattar Langary Jan 05, 2022 8:09PM ET
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Miss Trump already? Man, he was great for my stocks...
Peter ONeill
Peter ONeill Jan 05, 2022 8:09PM ET
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Yep great for cutting taxes on corporations and building up US national debt by almost $7 TRILLION over 4 years (more than the cumulative US debt built up from 1776 until 2003). The VAST vast majority of top CEOs wanted nothing to do with Trump and constantly tried to distance themselves from him. His main policies were collapsing safety nets on oil and banking, while making the USA the laughing stock of the world / burning international relationships (to be honest, Biden hasn't been much better).  It's like let's pile all our household debts on the credit card while buying drinks for our buddies at the bar so they like us.
Alan Rice
Alan Rice Jan 05, 2022 7:54PM ET
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($30,500,000,000,000) !! (Enough said.)
Mark Bolton
Mark Bolton Jan 05, 2022 7:19PM ET
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Are we pretending that this pullback hasnt been planned for weeks? The algos really put a lot of weight on anniverseries…
Joel Schwartz
Joel Schwartz Jan 05, 2022 7:18PM ET
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The FED turned Apple and Ford into meme stocks. Can they get out of the markets now?
Adam Paine
Adam Paine Jan 05, 2022 6:33PM ET
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the gains don't even compare to the drops. 1 Trillion in margin debt will wipe the markets out and BK a lot of "apes"
 
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