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Wall Street falls as Powell signals Fed is nowhere near done

  • The Fed increases by 75 basis points
  • US private payrolls rise more than expected
  • Powell says the Fed is nowhere near taking a break
  • Dow down 1.55%, S&P 500 down 2.50%, Nasdaq down 3.36%

NEW YORK, Nov 2 (Reuters) – U.S. stocks ended sharply lower on Wednesday as comments from Fed Chairman Jerome Powell dashed initial optimism over a Fed policy statement that raised interest rates by 75 basis points but signaled smaller rate hikes could be on the way road. horizon.

In volatile trade, stocks initially edged higher in the wake of the hike from the Fed, the fourth straight increase by the central bank of that magnitude as it tries to bring down stubbornly high inflation.

The target federal funds rate was set in a range between 3.75% and 4.00%, but the impact of the increase was initially tempered by new language that suggested the central bank was mindful of the effect its outsized rate hikes have had on the economy.

Reuters graphics

Investors had largely expected a rate hike of 75 basis points, while they hoped the Fed would signal a willingness to begin tapering rate hikes at its December meeting.

However, comments by Fed Chair Jerome Powell that it was “very premature” to think about stopping interest rate hikes sent shares sharply lower.

“It’s one speech, maybe it’s a moment of frustration. I don’t think he should have done it the way he did it. But I understand why he did it and in the big picture he’s doing the right thing right now,” Stephen said Massocca, senior vice president at Wedbush Securities in San Francisco.

“Ultimately, this will be good for the economy and good for the market.”

People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid

The Dow Jones Industrial Average (.DJI) fell 505.44 points, or 1.55%, to 32,147.76, the S&P 500 (.SPX) lost 96.41 points, or 2.50%, to 3,759.69 and The Nasdaq Composite fell (0.5.0 points). 3.36% to 10,524.80.

After a strong rally in October that saw the Dow Industrials post its biggest monthly percentage gain since 1976 and the S&P rally around 8%, Wall Street’s three major indexes have not fallen in three straight sessions. Wednesday’s decline was the biggest percentage drop for the S&P 500 since Oct. 7.

The S&P 500 had been modestly lower before the policy announcement, as the ADP National Employment report showed US private payrolls rose more than expected in October, giving more reason for the Fed to continue an aggressive path of rate hikes.

The private payrolls report followed data on Tuesday that showed a jump in US monthly job openings, indicating that demand for labor remained strong.

Investors will get more insight into the labor market in the form of weekly initial jobless claims on Thursday and the October payrolls report on Friday which will help drive interest rate hike expectations.

Volume on US exchanges was 12.80 billion shares, compared to the average of 11.57 billion for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 3.38 to 1; on the Nasdaq a 2.81 to 1 ratio favored decliners.

S&P 500 posted 22 new 52-week highs and 20 new lows; The Nasdaq Composite registered 108 new highs and 203 new lows.

Reporting by Chuck Mikolajczak; Editing by Cynthia Osterman

Our standards: Thomson Reuters Trust Principles.

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