All Three Indexes Decline Thursday Off Fed’s Hike The Daily Financial Trends

Stocks were down at the close Thursday after a volatile session following the Federal Reserve’s announcement of a third consecutive 75 basis point hike to the benchmark fed funds rate.

The S&P 500 was down 0.9%, as the Dow Jones Industrial Average dropped 0.4%. Meanwhile the Nasdaq was down 1.4%. The declines continued the selloff of yesterday, where the S&P 500 and Dow both gave up 1.7% and the Nasdaq rumbled 1.8%, all of which was triggered by the Federal Reserve’s continued aggressive policy stance and fixation on arresting the record levels of inflation at all costs.

Elsewhere the 2-year Treasury note held around 4.1%, its highest since 2007. The 10-year Treasury remained at 3.5%, its highest since 2011.

The Federal Reserve announced Wednesday, following their two-day policy meeting, that they would raise the fed funds rate 0.75% for a third consecutive time, which brought the key interest rate to a new range of 3.0% to 3.25%, up from the former rate of 2.25% to 2.5%.

After the meeting Fed Chair Jerome Powell gave remarks, noting policymakers now expect to have to raise rates higher, for longer than had previously been anticipated, projecting the fed funds rate would rise to 4.4% by the end of the year and 4.6% by the end of 2023. That estimate was up, from the previous expectations of 3.4% for this year and 3.8% for next year.

Following the Fed’s move, the Bank of England hiked its key rate by 50 basis points, and Switzerland’s National Bank raised its rate by 75 basis points. It is now expected the European Central bank will follow suit, following its next policy meeting next month.

Principal Global Investors Chief Global Strategist Seema Shah said, “With the new rate projections, the Fed is engineering a hard landing – a soft landing is almost out of the question. Powell’s admission that there will be below-trend growth for a period should be translated as central bank speak for ‘recession.’”

Mortgage rates continued to rise, now hitting 6.3% on a 30-year fixed rate mortgage, placing it at the highest level since 2008.

Jobless claims inched up, hitting 213,000 for the week ending September 17th. That was up from a downwardly revised 208,000 the previous week, which was the lowest since May. Economists had predicted 217,000 claims, according to Bloomberg’s consensus estimates.

Wednesday’s S&P movement was the 29th time this year the index declined between 1% and 2%. That is the most such moves since 2008, when the index had 34 such downward movements. Thursday’s decline just barely avoided the 30th such move.

The Daily Financial Trends

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