STOX FREE FALL
Worst day since ’20
The Dow suffered its worst one-day loss since October 2020 as investors weighed the possibility that the Federal Reserve could hike interest rates more than expected and digested days of disappointing earnings results.
The S&P 500 fell 2.8%, closing out a third straight losing week. The Dow Jones Industrial Average was off 981 points, or 2.8%, at 33,811.40. The Nasdaq composite slid 2.6%.
The sell-off meant that the Dow recorded its fourth consecutive week of declines.
A day earlier, Wall Street seemed set for healthy gains for the week after American Airlines, Tesla and other big companies reported strong profits or better forecasts for future earnings than analysts expected.
Such corporate optimism has helped stocks remain relatively resilient, even as worries swirl about the highest inflation in decades, the war in Ukraine and the coronavirus.
Markets buckled as the chair of the Fed indicated the central bank may indeed hike short-term interest rates by double the usual amount at upcoming meetings, starting in two weeks.
On Thursday, Fed Chairman Jerome Powell said it was “absolutely essential” for the central bank to tame surging inflation — indicating a half-percentage-point hike could occur in May. The Fed generally hikes rates by a quarter-percentage-point at a time.
Earlier in the week, the Fed’s James Bullard said he wouldn’t rule out the possibility of an even larger hike.
“After years of being very accommodative, the Fed has made it clear that policy is going to be tighter for the foreseeable future,” Brian Price, the head of investment management at Massachusetts-based Commonwealth Financial Network, told The Post.
“Their hawkish stance is giving investors pause as many are left to evaluate the impact on profit margins and equity multiples moving forward.”
The Fed has already raised its key overnight rate once, the first such increase since 2018.
Analysts will be watching closely when several bluechip tech firms, including Apple, Amazon and Microsoft, report earnings next week.