Wall St slides as jobs data hurt hopes of Fed

Wall Street falls as Powell signals Fed it’s not done yet

  • Fed hikes 75 basis points
  • US personal wage bills rise more than expected
  • Powell says the Fed is close to a break
  • Dow down 1.55%, S&P 500 down 2.50%, Nasdaq down 3.36%

NEW YORK, Nov 2 (Portal) – US stocks ended sharply lower on Wednesday as comments from Fed Chair Jerome Powell dashed initial optimism about a Fed policy statement that hiked interest rates by 75 basis points but signaled that smaller rate hikes could be on the horizon.

In a volatile trading session, shares initially rose on the back of the Fed’s rate hike, the fourth straight hike of this magnitude by the central bank as it seeks to stem stubbornly high inflation.

The target overnight interest rate was set in a range between 3.75% and 4.00%, but the impact of the rate hike was initially softened by new wording that suggested the central bank was aware of the impact of its outsize rate hikes on the economy .

Portal graphics

Investors had been widely anticipating a 75 basis point rate hike amid hopes that the Fed would signal its readiness to start cutting rate hikes at its December meeting.

However, comments by Fed Chair Jerome Powell that it was “very premature” to consider pausing rate hikes sent stocks sharply lower.

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

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

People are seen on Wall Street in front of the New York Stock Exchange (NYSE) in New York City, the United States, on March 19, 2021. Portal/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 (.IXIC) fell 366.05 points, or 3.36%, to 10,524.80.

After a sharp rally in October, which saw the Dow Industrials post its biggest monthly percentage gain since 1976, and the S&P rally about 8%, Wall Street’s three major indices have not fallen for three consecutive sessions. Wednesday’s drop was the S&P 500’s largest percentage drop since Oct. 7.

The S&P 500 was slightly lower ahead of the monetary policy announcement as the ADP National Employment Report showed that US personal employment totals rose more-than-expected in October, giving the Fed more reason to continue an aggressive trajectory of rate hikes.

The private payroll report on Tuesday followed data showing a rise in monthly job openings in the US, indicating demand for labor remains strong.

Investors will get more insight into the labor market in the form of weekly initial jobless claims on Thursday and the October payroll report on Friday, which will help boost expectations for rate hikes.

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

Declining issues predominated on the NYSE at a 3.38 to 1 ratio; on the Nasdaq, a 2.81 to 1 ratio favored decliners.

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

Reporting by Chuck Mikolajczak; Editing by Cynthia Osterman

Our standards: The Trust Principles.