Stocks fall on Powell’s slower but higher cues

US stocks fell on Thursday as Wall Street was rocked by Federal Reserve Chair Jerome Powell’s claims that hopes for a policy shift were “premature” after the central bank raised interest rates for a fourth straight 75 basis points had done.

The S&P 500 (^GSPC) declined 1.1% after the index fell 2.5% in the previous session, the biggest Fed-day loss since January 2021, according to Bloomberg data. The Dow Jones Industrial Average (^DJI) lost 150 points, or 0.5%, and the tech-heavy Nasdaq Composite (^IXIC) lost 1.7%.

Meanwhile, government bond yields rose, with key 10-year bonds heading towards 4.2% and rate-sensitive 2-year yields above 4.7%. The US dollar index also rose.

The S&P 500’s 2.5% loss on Wednesday marked its 54th drop of 1% or more in 2022 — the worst downside volatility since 2009, according to data Charlie Bilello of Compound Advisors.

US investors also turned their attention to action across the Atlantic, with the Bank of England following the Fed’s move and also raising interest rates by three-quarters of a percentage point.

Wednesday’s hike takes the Fed’s federal funds rate to a new range of 3.75% to 4%, the highest since 2008. Although the move was in line with expectations, stocks fell after Powell hinted that officials could raise interest rates above the previously estimated 4.6% – a signal of further tightening is certain, even after increases implied in the policy statement may be smaller.

“The market initially viewed the November Federal Open Market Committee (FOMC) statement as dovish, but a hawkish news conference caused an almost complete reversal of those moves on comments that the ‘final rate level will be higher than previously expected’ and it is ‘Premature to consider pausing rate hikes,'” said Bank of America economists led by Michael Gapen.

The FOMC statement also acknowledged the lagged impact of the cumulative monetary tightening, suggesting that the rate-setting group is paying increased attention to concerns about economic growth.

WASHINGTON, DC - NOVEMBER 02: Federal Reserve Board Chairman Jerome Powell delivers opening remarks during a press conference following a Federal Open Market Committee (FMOC) meeting at the Bank's headquarters on November 02, 2022 in Washington, DC.  To fight inflation, Powell announced that the Federal Reserve would raise interest rates by three-quarters of a percentage point, the sixth rate hike this year and the fourth consecutive such high rate.  (Photo by Chip Somodevilla/Getty Images)

WASHINGTON, DC – NOVEMBER 02: Federal Reserve Board Chairman Jerome Powell delivers opening remarks during a press conference following a Federal Open Market Committee (FMOC) meeting at the Bank’s headquarters on November 02, 2022 in Washington, DC. To fight inflation, Powell announced that the Federal Reserve would raise interest rates by three-quarters of a percentage point, the sixth rate hike this year and the fourth consecutive such high rate. (Photo by Chip Somodevilla/Getty Images)

Investors now turn their attention to the all important jobs report at 8:30am ET on Friday. According to Bloomberg estimates, figures from the Labor Department will forecast a wage increase of 190,000 for October. The push, if realized, would mark a drop in numbers during the pandemic recovery but reflect still resilient attitudes, averaging 150,000 to 200,000 payslips per month pre-COVID.

Powell also said in his speech that “the labor market has remained out of balance, with demand significantly outstripping the supply of available labor.”

In corporate news, according to a report by Bloomberg News, Elon Musk is reportedly planning to cut about half of Twitter’s workforce (3,700 out of about 7,500 employees) — just a week after completing a lengthy bid to buy the social media platform in a $44 billion deal.

Elon Musk's photo is featured through a Twitter logo in this October 28, 2022 illustration.  REUTERS/Dado Ruvic/Illustration

Elon Musk’s photo is featured through a Twitter logo in this October 28, 2022 illustration. REUTERS/Dado Ruvic/Illustration

On the earnings side, Qualcomm (QCOM) shares fell about 8% on Thursday after the smartphone chipmaker released a forecast that came in below estimates, citing macroeconomic headwinds and COVID lockdowns in China.

Roku (ROKU) shares fell 5% after the company warned of economic pressures and weakness in ad sales while forecasting a bigger-than-expected loss for the current quarter.

Meanwhile, shares of Etsy (ETSY) rose nearly 15% after the online marketplace reported third-quarter sales that beat analysts’ expectations.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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