Dow falls nearly 850 points on rate hike fears and poor earnings from Verizon


The Dow was fell more than 800 points, or 2.5%, in midday trading following comments about likely aggressive interest rate hikes from Federal Reserve chairman Jerome Powell. A poor earnings outlook from Dow component Verizon didn’t help matters.
All 30 stocks in the Dow were lower, led by Verizon (VZ), which fell 6%, and Caterpillar (CAT), which also plunged more than 6%. Dow component American Express (AXP) also was down in response to its latest earnings.
The S&P 500 and Nasdaq each dropped more than 2%, too. All three indexes are in the red for the week, with the Nasdaq sliding more than 3% in the past five days.
Powell confirmed what many bond investors already suspected…that a half-point interest rate hike is “on the table” for the Fed’s next meeting in May. The yield on the 10-year Treasury bond has spiked to 2.9% in recent days…the highest level since December 2018.

Stock traders seem to be worried that even more aggressive rate hikes are in the cards beyond May.

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Federal funds futures on the CME are indicating that the market is now pricing in a more than 90% chance of a three-quarter percentage point hike at the June meeting. That would bring rates, which were at zero just two months ago, to 1.5%. Rates haven’t been raised that sharply since November 1994.
The Fed is hoping that the rate hikes will put an end to runaway inflation. Economists and investors are concerned that surging interest rates will slow the housing market and consumer spending, and usher in a recession.
The CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, fell into Fear mode Friday.

“Fed worries and disappointing earnings are a lethal combination given how tenuous market sentiment is at the moment,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management.

Quoted from Various Sources

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