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Stocks Fall For a Second Day, Nasdaq Slides Another 2% as Fed Gives Policy Tightening Plans

Stocks fell for a second day on Wednesday and rates soared to new heights after the Federal Reserve gave more guidance on how fast it will tighten monetary policy to fight inflation, raising concerns it may slow the economy.


The Dow Jones Industrial Average fell 144.67 points, or 0.42%, to 34,496.51. The S&P 500 slid 0.97% to 4,481.15, and the Nasdaq Composite sank another 2.22% to 13,888.82 after falling about 2.3% on Tuesday.

“It was a warning to anyone who thinks that the Fed is going to be more dovish in their fight against inflation,” said Quincy Krosby, chief equity strategist at LPL Financial. “Their message is, ‘You’re wrong.’”

The Fed’s release of its meeting minutes indicated on Wednesday afternoon that officials “generally agreed” it should shrink its balance sheet by $95 billion per month. The minutes also showed central bank officials were considering larger rate hikes than the usual 25-basis-point, or quarter-point, increments. Stocks dipped to session lows after the release of the minutes but bounced back slightly to end the day.

Stocks Fall For a Second Day, Nasdaq Slides Another 2% as Fed Gives Policy Tightening Plans


Stocks Fall For a Second Day

“Many participants noted that — with inflation well above the Committee’s objective, inflationary risks to the upside, and the federal funds rate well below participants’ estimates of its longer-run level — they would have preferred a 50 basis point increase in the target range for the federal funds rate at this meeting,” the minutes said.

Meanwhile, the 10-year Treasury yield jumped above 2.65% to a three-year high on Wednesday and remained near that high following the release of the Fed meeting minutes. The rate ended Monday at 2.40%. The minutes were from the Fed’s March meeting when it raised rates by a quarter point and indicated six more hikes of that magnitude were coming this year.

“I think the stock market is getting the idea that $60 billion Treasurys and $35 billion in mortgages is starting to get real,” said James Caron of Morgan Stanley Investment Management. “If they do another 50 basis points hike in May and another 50 in June, it’s starting to get more real. It’s certainly not a tailwind for stocks.”


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