Dow Plunges 1,100 Points, Tech Shares Crater As Stocks Erase Gains From Post-Fed Rally

Topline

The stock market moved sharply lower on Thursday, reversing all of its gains from the previous session when the Federal Reserve raised interest rates by a half-percentage point, as volatility remains elevated and investors continue to worry about risks to economic growth.

Key Facts

The market is on pace for its worst day since 2020: The Dow Jones Industrial Average was down 3.3%, over 1,100 points, while the S&P 500 lost 3.9% and the tech-heavy Nasdaq Composite 5.1%.

Thursday’s declines reversed all of the market’s gains from a day earlier, when investors cheered a widely-anticipated half-percentage point interest rate hike from the Federal Reserve—the largest increase in over two decades.

Despite the Fed’s big announcement, stocks were back down again as investors continued to dump shares of tech companies, which have been especially hard-hit amid the wider market sell-off so far this year.

Several e-commerce companies saw shares fall after disappointing first quarter earnings on Thursday, weighing on market sentiment: eBay lost over 10%, Etsy 17% and Shopify 16%.

Shares of Big Tech companies were also moving sharply lower, with Amazon and Facebook-parent Meta both falling around 7%, while Microsoft lost over 4%.

Government bond yields were on the rise amid the heightened uncertainty, with the 10-year Treasury note once again trading above 3%—its highest level since 2018.

Key Background:

Stocks had surged higher on Wednesday following the Federal Reserve’s rate hike: The Dow Jones Industrial Average rose 2.8%, over 900 points, while the S&P 500 gained 3% and the tech-heavy Nasdaq Composite 3.2%. Recent market moves have been extremely choppy, with equities still recovering from a brutal sell-off in April. The Dow and S&P 500 both recorded their worst months since March 2020, down 4.9% and 8.8%, respectively, while the Nasdaq posted its worst month since 2008, falling over 13%. Many analysts have warned of rising recession risks, as the Federal Reserve will likely have a tough time aggressively raising interest rates without hurting economic growth.

Crucial Quote:

“There’s a real battle going on between dip buyers and those that believe there is more downside to come,” says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. He believes that markets are in a “difficult period” and that there is “still more downside ahead later this year,” though bear market rallies can be “sharp and vicious (for those left behind).”

What To Watch For:

The latest move from the central bank on Wednesday “confirms the base case scenario that the markets incorrectly priced in huge aggressive Fed action this year,” says Jeffrey Roach, chief economist for LPL Financial. Though the Fed said it is “prepared to adjust policy” as needed, “inflation risks linger from the Russian invasion and China’s extreme COVID lockdowns,” Roach adds.

Further Reading:

Dow Jumps 900 Points After Federal Reserve Hikes Interest Rates By Half-Percentage Point (Forbes)

Fed Authorizes Biggest Interest Rate Hike In 22 Years To Fight Inflation Amid ‘Violent’ Stock Selloff (Forbes)

Markets Inch Higher—But Experts Warn Of ‘Continued Volatility’ After ‘Brutal’ Stock Selloff (Forbes)

Stocks Could Plunge Another 15% After Fed-Spurred Selloff—Will The Economy Fall Into Recession? (Forbes)