Dow rises 150 points as markets try to recover from two-day Fed-induced sell-off

Stocks erased earlier losses and climbed higher on Thursday, following back-to-back losing sessions, as investors assessed whether the Federal Reserve’s latest plans to tighten monetary policy and combat rising inflation could further slow the economy.

The Dow Jones Industrial Average rose 150 points, or 0.5%, after dropping as much as 300 points earlier in the session. The S&P 500 advanced 0.6% and the Nasdaq Composite inched up 0.2% after falling more than 2% on Wednesday.

Defensive stocks like consumer staples and health care companies led the market comeback Thursday as investors continued their search for safe-haven stocks. Costco rallied 4%, while Pfizer popped 4.5%. Walmart, Merck, UnitedHealth Group and Procter & Gamble also traded in the green.

Constellation Brands and Lamb Weston Holdings jumped 4% and 7%, respectively, after reporting earnings.

“The moves are not surprising,” said Timothy Lesko, senior wealth advisor at Mariner Wealth Advisors. “You have a marketplace that is trying to get its head around what valuations should be in a higher interest rate environment. Every piece of economic news that comes out changes that forward expectation at the margin and the market needs to figure that out.”

Investors continued to fear recent moves from the Fed could slow the economy, which led industrial stocks closely linked to it like Honeywell and General Electric to dip 2%. Transportation companies including UPS and FedEx also declined on Thursday, along with stocks tied to consumer travel like United Airlines and Norwegian Cruise Line.

On the tech front, shares of HP Inc surged 16% after Warren Buffett’s Berkshire Hathaway disclosed a stake in the tech hardware maker, while semiconductors like Nvidia and AMD declined for their third day. Amazon, Alphabet and Meta all dipped into the red.

The S&P 500 traded around 4,455 and is down about 2% this week, but is only 7% off its all-time high even as markets take a hit and investors digest the Fed news.

“The S&P 500 has come under pressure over the past couple of sessions, however key support at 4455/50 is still holding for now,” wrote Credit Suisse’s David Sneddon. “Only a break below here would turn the short-term risks back lower in the range. Particularly concerning is that volume has been ticking up as the market falls.”

Thursday’s moves come after the Fed released minutes from its March meeting on Wednesday, which showed that officials planned to reduce their trillions in bond holdings with a consensus amount around $95 billion. Meanwhile, policymakers indicated that one or more 50 basis-point interest rate hikes could be warranted to battle surging inflation.

“The minutes from the latest FOMC meeting portray a higher level of urgency than previous communication as the Fed has circled on a commitment to run the balance sheet down faster than market participants may have expected,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Officials “generally agreed” that a maximum of $60 billion in Treasurys and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months and likely starting in May. 

The news sent the blue-chip Dow down more than 100 points Wednesday, while the S&P 500 slid 1%. The tech-heavy Nasdaq Composite dropped another 2.2%. Those losses came after comments from Fed Governor Lael Brainard pushed stock prices lower on Tuesday.

Investors on Thursday continued to monitor the Ukraine-Russia war, as Ukraine asks NATO for more weapons and the EU and U.S. weigh a ban on Russian coal. Meanwhile, the U.S. Senate passed a bill banning Russian oil and gas imports.

Crude prices, which have been volatile amid the war in Ukraine, continued their descent from the previous session on Thursday. U.S. oil fell 0.6% to $95.66 per barrel, while international Brent slid 0.7% to $100.32.