Shares slide, wiping out Wednesday’s gains

Shares plunged on Thursday, giving up gains from their best day since 2020 in a swing that highlights Wall Street’s uncertainty about what the The Federal Reserve’s campaign to slow inflation it can mean for the economy.

The S&P 500 fell as much as 3.5% in midday trading after a 3% gain on Wednesday. Government bond yields increased, with the 10-year US Treasury bond rate, a benchmark for financial costs, rising to just above 3%, the highest level since late 2018. .

The swings in the stock market have been amplified lately as investors fear that the combination of inflation and rapidly rising interest rates could affect consumer spending, corporate profits and ultimately economic growth.

on Wednesday, the Fed raised its benchmark rate by half a percentage point. That decision was widely expected by investors and after Fed Chairman Jerome H. Powell told a news conference that politicians were not considering making even larger hikes, notably ruling out a 0.75 percentage point jump in. a future meeting – the S&P 500 has skyrocketed.

Higher interest rates will dampen inflation by making it more expensive for consumers and businesses to borrow and spend, reducing demand. But the Fed also recognized the factors behind the price increase that are beyond its control, namely the Russian invasion of Ukraine, which pushed energy prices higher, and the recent Chinese blockade. Covid which could further interrupt an already unstable supply chain.

“Markets are now returning to expectations for financial conditions that existed prior to yesterday’s press conference,” said Scott Knapp, chief market strategist of CUNA Mutual Group. “Investors have seen the Fed shift from its theory that inflation is transient to one of considerable concern because of its potential duration and the toll on the economy.”

That move from the Fed triggered a drop in the S&P 500 in April, with the index down 8.8% for the month.

Tech stocks, which were particularly susceptible to selling as investors rethink their willingness to own risky investments, were significantly lower on Thursday. Meta, the parent company of Facebook, fell 6% and Amazon fell more than 7%. Apple, Microsoft and Alphabet, Google’s parent company, also fell short.

Thursday’s retreat precedes a couple of widely followed economic updates. The Department of Labor will release its monthly employment report on Friday, which could provide a better indication of how tight the US labor market is.

Last month, Mr. Powell indicated that the job market was “unsustainable heat”, fueling concern that the Fed would step up its efforts to raise rates.

The government will also release its latest consumer price index update next week. In March, that measure of inflation went up 8.5 percent, that’s it the fastest pace in 12 months since 1981as an increase in gasoline prices linked to the Russian invasion of Ukraine added to the increases resulting from the collision of strong demand.

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