Stocks fell for a second session on Thursday following the Federal Reserve’s aggressive rate hike, as investors increasingly fear the central bank will push the economy into a recession as it battles to curb rising inflation.
The S&P 500 traded 0.6% lower, and slumped to its lowest level since mid-July. The Nasdaq Composite slid 1.2%. The Dow Jones Industrial Average was last down about 23 points.
Bond yields surged again on Thursday, with the yields on the 10-year and 2-year Treasury notes hitting fresh multiyear highs.
The Dow dropped 500 points on Wednesday as the Fed maintained its aggressive stance, enacting another 75 basis point hike and predicting bringing short-term rates as high as 4.4% by the end of 2022. Other central banks worldwide followed the Fed’s lead, implementing their own sizeable hikes overnight despite potential repercussions for the economy.
Growth-oriented tech stocks and semiconductors took a leg lower on Thursday amid fears of slowing economic growth. Industrials and consumer discretionary were the worst-performing S&P 500 sectors, losing at least 1% each, because of their reliance on the economy.
“The Fed’s paved the way for much of the world to continue with aggressive rate hikes, and that’s going to lead to a global recession, and how severe it is will be determined on how long it takes inflation to come down,” said Ed Moya, a senior market analyst at Oanda.
Defensive stocks outperformed with drugmakers and consumer staples in the green on Thursday. Eli Lilly shares gained 4% after UBS upgraded the stock and said it could be developing the biggest drug ever.
All the major averages are on pace to finish the week with losses. The Dow is down about 2.1%, while the S&P and Nasdaq have tumbled 2.6% and 3.1%, respectively.