Market Snapshot: Dow ends down 200 points, Nasdaq falls 1.7% after Fed officials say more interest rate hikes could be needed to cool inflation

by | Feb 8, 2023 | Stock Market

U.S. stock indexes finished lower on Wednesday, as investors digested comments from a cluster of Federal Reserve speakers which exacerbated concerns that the central bank still has more interest rate rises ahead and will keep monetary policy restrictive. How stock indexes traded?
The Dow Jones Industrial Average
dropped 207.68 points, or 0.6%, to end at 33,949.01

The S&P 500
was off 46.14 points, or 1.1%, to finish at 4,117.86

The Nasdaq Composite 
lost 203.27 points, or 1.7%, ending at 11,910.52

On Tuesday, stocks ended a wild trading session with solid gains after remarks by Fed Chair Jerome Powell that investors took as optimistic on the ability to bring down inflation despite his warning that the process would be long and bumpy.

What drove the markets? U.S. stock indexes finished lower on Wednesday as traders heard from a cluster of Fed officials, including New York Fed President John Williams and Fed governor Christopher Waller. Waller warned on Wednesday that the inflation fight is not over and could result in higher interest rates to make sure intense price pressures are eradicated. “Inflation remains quite elevated, and so more needs to be done,” Waller said in a speech at an agribusiness conference at Arkansas State University. He did not address how far he wanted the Fed to raise rates, but said he’s seen little evidence inflation is falling “quickly.” See: Fed’s Waller says he’s prepared for ‘longer fight’ against inflation Earlier Wednesday, Williams, said in an interview with the Wall Street Journal, that the Fed needs to maintain “restrictive” interest rates for a few years to make sure high inflation is restored to low pre-pandemic levels. Yet despite a strong January jobs report, Williams said it was appropriate for the Fed to step down to a quarter point rate rise after a series of 50 basis points rate increases through most of 2022. See: Williams says Fed needs to keep interest rates high ‘for a few years’ to kill off inflation “US stocks declined after Williams did the pushback that everyone was expecting Fed Chair Powell to do,” Edward Moya, Senior Market Analyst at Oanda said. “Williams quickly sank risk appetite after he reminded Wall Street that if financial conditions loosen, higher rates may be needed. Financial conditions have been easing since Oct …

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