May27 , 2022

Dow tumbles 1,100 points, Nasdaq loses 5% in worst day of the year so far

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The Nasdaq plunged 5% and the other major indexes tumbled on Thursday, as Federal Reserve Chair Jerome Powell’s less hawkish tone failed to ease investor expectations of bigger interest rate hikes this year.

The Dow Jones Industrial Average lost 1,172 points, or 3.4%. The S&P 500 and Nasdaq Composite fell 4% and 5.2%, respectively.

The tech-heavy Nasdaq looked set to erase all of its gains in the previous session, with Google-parent Alphabet Inc, Apple Inc, Microsoft Corp, Meta Platforms, Tesla Inc and Amazon.com falling between 4.5% and 6.5%. The declines put the tech-heavy Nasdaq on track for one of its worst days since the pandemic began.

All of the 11 major S&P sectors declined, with consumer discretionary and technology being the worst hit and slumping 5.5% and 4.8%, respectively.

The benchmark S&P 500 index recorded its biggest one-day percentage gain in nearly two years on Wednesday after the Fed raised interest rate by half a percentage point as expected and said it would begin shrinking its $9 trillion asset portfolio next month in an effort to further lower inflation.

Fed Chair Jerome Powell explicitly ruled out raising rates by 75 basis points in a coming meeting, calming nerves over fears of aggressive policy tightening.

However, on Thursday, traders saw a 75% chance of a 75 basis point hike by the Fed at its June 15 meeting.

“I will say the markets are not buying the dovish Fed,” said Callie Cox, U.S. investment analyst at eToro

“We’ve had a lot of Fed speakers come out and basically throw the spaghetti at the wall and say that rate hikes need to happen faster and happen now. So, it makes sense that investors are kind of reverting back to this place of fear that the Fed could do way more than they imagined to get policy to fight inflation.”

The focus now shifts to the U.S. Labor Department’s closely watched monthly employment report on Friday for clues on labor market strength and its impact on monetary policy.

Worries about Fed policy moves, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, overshadowing a better-than-expected quarterly reporting season.

The CBOE Volatility index, also known as Wall Street’s fear gauge, touched close to 30 points.

Declining issues outnumbered advancers for a 9.34-to-1 ratio on the NYSE and for a 6.18-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 40 new lows, while the Nasdaq recorded 20 new highs and 267 new lows.



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