On Friday, Wall Street saw all three of its major indexes sink about 3%, after the signal from Jerome Powell that the US central bank had no intention of pulling back from its aggressive monetary policy stance.
The Federal Reserve’s chairman nixed nascent hopes that investors had about the central bank taking a more modest path in its battle against rampant inflation.
No stopping the Fed
Amongst the three major Wall Street indexes, it was the Nasdaq Composite that led declines and recorded its worst performance in a day since June 16th.
It was weighed down by high-growth tech stocks, which had recorded a rally a day earlier in anticipation of the speech of the US Fed chief in Jackson Hole, Wyoming at the central banking conference.
Powell said that they would hike rates and stick to them for some time before they have a strong handle on inflation.
This would mean slow growth for the economy, weakening in the jobs market, and tough financial conditions for businesses and households alike.
Investors had already been prepared for interest rate hikes, but there had been uncertainty between 50 basis points and 75 basis points increase in the next month.
But recent data showed strength in the labor market offsetting negative economic growth for two straight quarters. This led to speculation that the Fed could slow down a bit.
After absorbing Powell’s speech, investors did some repositioning and this saw the CBOE Volatility Index climb to 25.56, the highest it has been in six weeks.
There were declines in all 11 sectors of the S&P 500 index, with consumer discretionary, communication services, and information technology indexes recording declines between 3.9% and 4.3%.
There was a 3.37% drop in the Dow Jones Industrial Average, which brought it down by 141.46 points to close at 4,057.66 points.
The Nasdaq Composite shed 3.94%, which brought it lower by 497.56 points to end the day at 12,141.71 points.
There was also a loss of 3.03% recorded in the Dow Jones Industrial Average, as it lost 1,008.38 points to hit 32,283.40 points.
There was a drop in technology and high-growth stocks. Amazon.com and Nvidia Corp recorded losses of 4.8% and 9.2%, respectively, having recorded gains in the last session.
Meanwhile, there were also losses between 4.1% and 7.7% recorded by Meta Platforms Inc., Google-parent Alphabet Inc., and Block Inc.
The week saw a 4.4% decline in the Nasdaq Composite, a 4.2% drop in the Dow Jones, and a 4% loss for the S&P 500 index.
There was also a 13.5% drop in Dell Technologies Inc., as it joined its competitors in forecasting a slowdown, as the worsening economic outlook and inflation prompted businesses and consumers to cut back on spending.
A 21.3% decline was seen in Affirm Holdings Inc., after the buy-now pay-later lender’s revenue forecast for the full year was below the estimates of Wall Street, highlighting a bigger downturn in its fortunes.