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Stocks slump on Wall Street as Fed steps up inflation fight

Wall Street closed sharply lower after the Federal Reserve stepped up its fight against inflation by raising interest rates. The S&P 500 dropped his 1.7% on Wednesday, as did the Dow Jones Industrial Average. The Fed’s fifth rate hike this year came as expected, by three-quarters of a percentage point, but the central bank also raised its expectations of how much higher interest rates would ultimately be needed. The Fed is raising rates to combat the worst inflation in his 40 years. The concern is that it could put the brakes on the economy too much, triggering a recession.

This is breaking news. Here’s AP’s previous story:

Equities rallied and bond yields surged Wednesday after the Federal Reserve (Fed) delivered three big rate hikes in a row and significantly raised its outlook for rate hikes expected in the coming months. did.

After the central bank raised short-term interest rates by three-quarters of a percentage point, US Treasury yields were pushed further to multi-year highs. The Federal Reserve also said it expects the benchmark interest rate to be one percentage point higher than it predicted in June by the end of the year.

The S&P 500 rose 0.5% after vacillating between gains and losses as traders weighed the impact of the Fed’s rate hike, which will have far-reaching implications for markets and the economy.

At 2:51 pm, the Dow Jones Industrial Average was up 85 points, or 0.3%, while the Nasdaq was up 0.7%.

Yields on two-year US Treasuries, which tend to follow expectations of Federal Reserve (Fed) action, rose to 3.99% from 3.97% late Tuesday. It is trading at its highest level since 2007. Yields on 10-year US Treasuries, which affect mortgage rates, fell to 3.53% from 3.56% late Tuesday.

The Fed is raising interest rates to combat the worst inflation in 40 years. The concern is that the Fed will slow the economy too much, triggering a recession.

“The fixed income market is leading the equity market, and the markets are dancing to the Fed Funds Waltz,” said Sam Stovall, chief investment strategist at CFRA.

The broader market has oscillated between gains and losses throughout the week as investors wait for updates. interest rate update from the Federal Reserve. They are watching closely as Fed Chairman Jerome Powell discusses the central bank’s view of the economy and his Fed’s efforts to control the worst inflation in 40 years.

The Federal Reserve (Fed) is aggressively raising interest rates to keep prices down on everything from food to clothing.

Recent rate hikes by central banks have raised benchmark interest rates. Affects many consumer and business loansranged from 3% to 3.25%, the highest level in 14 years, up from zero at the beginning of the year.

The Federal Reserve’s goal is to slow economic growth and keep inflation under control, but Wall Street worries it could put too much of a brake on an already slowing economy and trigger a recession. doing. These concerns were reinforced by reports that inflation remained stubbornly high and statements by his Fed officials that they would continue to raise rates until inflation was brought under control.

Central banks around the world are also dealing with inflation. The Bank of Japan kicked off its two-day monetary policy meeting on Wednesday, but analysts expect the central bank to stick to accommodative monetary policy. Next are Norwegian, Swiss and Bank of England interest rate decisions.Sweden surprises economists this week full point hike.

Global tensions remain high as Russia’s invasion of Ukraine continues.Russia-controlled territories in eastern and southern Ukraine announced Voting scheduled to start Become part of Russia this week. War has killed thousands of people, pushed up food prices around the world, and sent energy costs skyrocketing.

Gasoline prices are generally falling after months of accelerating inflation.But the average price of a gallon of gasoline is went up It rose from $3.674 to $3.681 for the first time in over three months, according to Motor Club AAA.

Several companies have gained endorsements after providing encouraging financial updates to investors. Cheerios maker General Mills rose 5.9% after raising its full-year profit forecast. CoverGirl owner Coty is up 4.2% after posting solid earnings growth, and Walmart is up 1.6% after announcing he will hire 40,000 U.S. workers for the holiday season. Most of them are seasonal workers.

Cruise ship operators slipped as Hurricane Fiona continued to attack the Caribbean Sea. Carnival fell 4.2%.

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Yuri Kageyama and Matt Ott contributed to this report.

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