Stocks fell on Thursday as Federal Reserve officials cut interest rates and raised interest rates to curb inflation.
The Dow Jones industrial average was down 245 points, or 0.7%. The S&P 500 fell 1.2%, while the Nasdaq composite fell 1.4%.
St. Louis Federal Reserve President James Bullard said in a speech Thursday said “the policy rate is still not in the zone where it is considered sufficiently constrained.”
“The change in monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests inflation is expected to rise in 2023,” Bullard added.
The 2-year Treasury yield rose to 4.437% Thursday morning, raising fears that higher rates could send the economy into recession.
“I see a very tight labor market, and I don’t know how you bring inflation down without some real slowdown, and maybe even a contraction in the economy to get there,” he said. Kansas City Fed President Esther George For the Wall Street Journal On Wednesday.
Stocks that are more vulnerable to recessions and higher rates lead to losses. Funds including Wells Fargo were underperforming. Tech stocks Tesla and Netflix fell.
“Additional monetary tightening and the overall impact of rate hikes this year suggest recession risks are elevated,” Mark Heffel, chief investment officer at UBS Global Wealth Management, wrote in a note. “We continue to believe that the macroeconomic preconditions for a sustained rally—with interest rate cuts and growth and corporate earnings on the horizon—are not yet in place.”
