The S&P 500 fell 2.7%, while the Dow Jones Industrial Average fell 2.1%, or around 639 points. The technology-heavy Nasdaq Composite fell 3.5 percent.
Major indices rose on Wednesday after the Federal Reserve raised its reference rate by 0.75 percentage points. It was the Fed’s largest interest rate increase since 1994, but was in line with investors’ expectations as the central bank raged to tame high inflation. Fed Chairman Jerome Powell said he “did not expect movements of this magnitude to be common,” and investors raised shares in companies from banks to technology companies.
That optimism swirled on Thursday. Shares fell broadly, with each of the S&P 500’s 11 sectors down lower on the day.
Some analysts said that investors will reconcile with the increasing risk of economic growth.
“I think this is the recognition that we can really be heading for a recession. I̵[ads1]7;m not sure it has really filtered through the market until now,” said Altaf Kassam, Head of Investment Strategy for Europe, the Middle East and Africa at State Street Global. Advisors.
Shares also fell abroad. The pan-continental Stoxx Europe 600 index fell 2.3%, with heavy losses for price-sensitive technology companies and economically sensitive retail stocks. In Asia, Hang Seng in Hong Kong fell 2.2%, while Japanese Nikkei 225 increased by 0.4%.
While Mr. Powell on Wednesday suggested that the “unusually large” interest rate increase would not be normal, he left the door open for a new increase of 0.75 percentage points as soon as next month.
Interest rate hikes of that magnitude could confuse investors if they feel the Fed is moving too fast to stay ahead of inflation, said Aoifinn Devitt, Moneta’s chief investment officer. “It could lead to even more anxiety in the market,” she said.
The losses accelerated after the Swiss central bank surprised investors by raising interest rates for the first time in 15 years. The Swiss National Bank raised its key interest rate by 0.5 percentage points to a negative 0.25%, so that only the Bank of Japan among the major central banks in developed economies has not raised interest rates to curb inflation. Economists had expected that SNB would leave interest rates unchanged.
“This is the last hurdle that falls,” said Seema Shah, chief strategist at Principal Global Investors. “If we get the central banks that have been considered permanently pigeon-raising interest rates, then there is no doubt that there is a huge inflation problem in the global economy.”
The Bank of England on Thursday raised its policy rate as expected to 1.25% from 1%, marking its fifth move in as many meetings, saying that larger moves may be needed to tame inflation.
Weekly data on unemployment claims showed that 229,000 Americans applied for unemployment benefits in the week ending June 11. The labor market has been an area of strength for the economy, but Fed officials have signaled that weaker employment figures may be a necessary consequence of the central bank’s efforts to control inflation.
Within the US market, shares of technology companies fell, with Nvidia,
Amazon and Microsoft each fall between 2% and 6%. Twitter shares were an exception, rising 0.6% after The Wall Street Journal reported that Tesla boss Elon Musk is expected to confirm that he wants to buy the social media company when he talks to its employees on Thursday.
The yield on the benchmark index for 10-year US government bonds rose to 3.412% from 3.389% on Wednesday, and resumed the rise that has pushed interest rates to the highest level in more than a decade. Treasury yields, which move in the opposite direction of prices, help set interest rates on a range of consumer products, including mortgages and car loans.
Bitcoin fell 3.2% from 17:00 ET level on Wednesday to $ 20,940, according to CoinDesk, which set it on course to fall for a 10th day in a row. Cryptocurrencies have been hit by widespread economic concerns that hurt risky trades and concerns about selected projects and companies in the crypto ecosystem.
In commodity markets, Brent oil, the international oil reference, fell 2.1% to $ 115.98 a barrel. The gold price rose 0.5 percent.
—Karen Langley contributed to this article.Write to Will Horner at email@example.com
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