Dow drops 200 points as Fed expects softer tightening

Stocks fell on Thursday, paring Wednesday’s losses after the Federal Reserve delivered another interest rate hike and signaled that no outlook or rate cut is coming anytime soon.

The Dow Jones industrial average was down 115 points, or 0.35%. The S&P 500 and Nasdaq Composite fell 0.5% and 0.4%, respectively.

The yield increased Traders digested the latest rate decision and put pressure on stocks. The The yield on the 2-year Treasury note hit its highest level since July 2007 The benchmark 10-year Treasury yield rose 8 basis points to 4.141%.

“While Powell’s dovish comments yesterday disappointed some and flipped the script on the early rally, don’t be surprised to see the same volatility as investors digest the report and anticipate the Fed’s next steps,” said Mike Lowengard, president of Model Portfolio. Construction at Morgan Stanley Global Investments Office.

Traders were expecting a 0.75 percentage point rate hike from the central bank and initially read the central bank’s statement as dovish. That initially sent stocks higher on Wednesday, but those gains were reversed when Fed Chairman Jerome Powell said it was “premature” to discuss a rate hike pause and that the terminal rate would be higher than previously said.

“We still have some way to go and the incoming data suggests our last meeting, the final level of interest rates will be higher than previously expected,” he said.

The Dow Jones Industrial Average closed Wednesday’s trading session down 505 points, or 1.6%. The S&P 500 fell 2.5%, while the Nasdaq composite fell 3.4%.

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Until it becomes clear that inflation has subsided and the central bank has stopped raising rates, markets will continue to watch. But traders were divided over interest rates are at the helm. Any data showing the U.S. economy is not slowing down as the central bank tightens policy will weigh on stocks.

“In our view, the risk-reward for markets is unfavorable over the next three to six months, and today’s Fed report supports that view,” UBS chief investment officer Mark Heffel wrote in a note to clients on Wednesday.

Investors’ attention also turned to non-farm payrolls due in October. A good jobs number and low unemployment rate, while good for the economy, could signal more jobs for the Fed.

Corporate earnings season continues Qualcomm, year And Fortinet All come down hard on disappointing quarterly results and forward guidance. PelotonIts stock has since fallen Reports a higher than expected lossWhen Moderna sank Reduced Covid Vaccine Sales Outlook.

Correction: An earlier version misstated declines in Wednesday’s session.

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