Wall Street plummets, wiping out a big rally the day before

Stocks tumble on Wall Street, erasing a rally from the previous day, as markets weigh the impending fallout from the Federal Reserve’s heightened fight against inflation

NEW YORK — Stocks tumble on Wall Street, erasing a rally from the previous day, as markets weigh the impending fallout from the Federal Reserve’s heightened fight against inflation. The Dow Jones fell 1,000 points, or 3%, and the S&P 500 fell 3.4%. Markets rallied a day earlier after the Fed said it would not act as quickly as some feared to raise interest rates, but traders are starting to worry more about the impact of the measures of the Fed to curb demand for loans. Bond rates have resumed their upward march, which will drive mortgage rates up. The 10-year Treasury yield rose sharply, to 3.09%.

THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.

NEW YORK (AP) — Wall Street reversed Thursday, giving up much of the big gains it made a day earlier, relieved that the Federal Reserve would not be as aggressive as some feared in raising interest rates. interest in fighting inflation.

The sharp reversal follows the Federal Reserve’s decision on Wednesday to raise its benchmark interest rate by half a percentage point as it tries to tackle still-high inflation. The central bank also reassured investors that it was not considering even bigger rate hikes in the coming months.

The S&P 500 fell 2.6% at 10:23 a.m. EST. The benchmark index climbed 3% on Wednesday for its best day since May 2020.

The Dow Jones Industrial Average fell 691 points, or 2%, to 33,370 and the Nasdaq fell 3.7%.

All major indices remain on track for strong weekly gains after Wednesday’s rally.

Bond yields have risen significantly. The 10-year Treasury yield rose to 3.03% from 2.92% on Wednesday night, hitting its highest levels since late 2018.

Tech companies posted some of the biggest losses and weighed on the broader market, reversing from the strong gains they had made the day before. Apple fell 3.4% and Microsoft 3.9%.

Internet retail giant Amazon fell 6.4% and parent company Google fell 4.3%.

Energy stocks held up better than the rest of the market, with US crude oil prices rising 1.4%. Energy markets remain volatile as the conflict in Ukraine continues and demand remains high amid oil shortages. European governments are trying to replace energy supplies from Russia and are considering an embargo. OPEC and allied oil producing countries decided on Thursday to gradually increase the flow of crude they send around the world.

Rising oil and gas prices have contributed to uncertainty hanging over investors as they try to gauge the impact of inflation on businesses, consumer activity and overall economic growth.

The Fed’s aggressive move to raise interest rates has investors wondering if it can pull off the delicate dance to slow the economy enough to halt high inflation, but not so much as to cause a downturn. The pace and magnitude of interest rate increases are closely scrutinized.

The Fed’s latest decision to raise interest rates by half a percentage point was widely expected. Markets stabilized this week ahead of the policy update, but Wall Street feared the Fed might decide to raise rates by three-quarters of a percentage point in the coming months. Fed Chairman Jerome Powell allayed those concerns, saying the central bank was “not actively considering” such an increase.

The central bank also announced that it would start shrinking its massive $9 trillion balance sheet, made up mostly of treasury bills and mortgage bonds, from June 1.

The Bank of England raised its benchmark interest rate to the highest level in 13 years on Thursday, its fourth rate hike since December as UK inflation hit 30-year highs.

The latest corporate earnings reports are also closely watched by investors trying to get a better idea of ​​the impact of inflation on the economy. Cereal maker Kellogg rose 4.1% and energy company ConocoPhillips rose 1.7% after reporting encouraging financial results. Etsy tumbled 15.5% after giving a weak forecast.

Twitter rose 3.6% after Tesla CEO Elon Musk said he had gained more support for his takeover bid for the company.

ABC News

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