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Wall Street tumbles on recession fears; S&P 500 tanks 3 pc

The Dow Jones Industrial Average dropped 2.3 percent to 29,950.40, while the tech-rich Nasdaq Composite Index fell 3.6 percent to 10,701.92.

AFP

Updated Jun 16, 2022, 20:51 IST

Wall Street

Photo : BCCL

Wall Street stocks lost ground early Thursday following the Federal Reserve's large interest rate hike the day before aimed at countering runaway inflation without triggering a recession.

The US central bank raised the benchmark borrowing rate Wednesday by 0.75 percentage points, bigger than the telegraphed half-point increase after economic data in recent days showed inflation strengthening and consumer confidence weakening.

Markets had initially welcomed the super-sized move, the first 75-basis-point rate hike since November 1994.

But stocks tumbled Thursday with the broad-based S&P 500, which entered a "bear market" earlier this week following the latest inflation data, losing nearly three percent to 3,689.43 about an hour into the trading session.

The Dow Jones Industrial Average dropped 2.3 percent to 29,950.40, while the tech-rich Nasdaq Composite Index fell 3.6 percent to 10,701.92.

Fed Chair Jerome Powell said policymakers have the "tools" and "resolve" to do what it takes to lower inflation from the highest level in more than 40 years, adding that the central bank could hike the benchmark interest rate by another 75 basis points in July.

Other major central banks followed suit, including the Bank of England, as rising prices amid the war in Ukraine become a major challenge.

"Inflation is a global problem. Most central banks are raising rates to combat inflation," said Patrick O'Hare of Briefing.com.

"Inflation, though, isn't coming down fast enough -- or at all yet," he warned.

"Hence, there is a stagflation buzz in the air and it isn't good for financial assets, which are getting broadsided by recession concerns, deteriorating investor confidence, and liquidity constraints as buyers ride a wave of uncertainty to the sidelines."

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