From euphoria to panic: Wall Street collapses more than 5% after the largest rate hike by the Fed in 2 decades

From euphoria to panic: Wall Street collapses more than 5% after the largest rate hike by the Fed in 2 decades

The Dow Jones Industrial Average fell 3.3%, while the S&P 500 fell 3.6%. While the Nasdaq Composite sank 5.2%.

The benchmark S&P 500 posted its biggest daily percentage gain in nearly two years on Wednesday, after the Fed raised interest rates by 50 basis points as expected and said it would start cutting its $9 trillion asset portfolio in June in an effort to contain inflation.

Powell explicitly ruled out raising rates by 75 basis points at an upcoming Fed meeting, calming fears of aggressive monetary policy tightening.

However, on Thursday, traders were estimating a 75% chance of a 75 basis point hike by the Fed at its June 15 meeting. “I will say that the markets are not buying the dovish Fed”said Callie Cox, US investment analyst at eToro.

For its part, Juan Ignacio Abuchdid, CEO of the IEB Groupexplained that “The sharp drop this Thursday seems to correct the exaggerated rise on Wednesday. Waiting for a message that was more ‘hawkish’, there were many operators with short positions who had to close before a more ‘dovish’ message, which motivated the strong punctual rise of the day before”.

Attention now turns to the Labor Department’s monthly employment report on Friday, looking for clues about the strength of the labor market and its impact on monetary policy.

The slump is also in response to 10-year US Treasury bond yields, which have climbed to their highest since November 2008 of 3.042% and are trading up 12 basis points to 3.0365%. Higher Treasury yields are seen as particularly negative for technology and other growth stocks, as they reduce the present value of future earnings and cash flow that drive their valuations.

Despite the market decline, Twitter Inc rose 3.7% as Elon Musk secured $7.14 billion in funding from a group of investors that includes Oracle Corp co-founder Larry Ellison for his purchase of the Twitter firm. social networks for 44,000 million dollars.

Source: Ambito

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