Stocks fall for a third day as Fed signals this week a speedier policy tightening plan
Stocks fell again on Thursday, following back-to-back losing sessions, as traders weighed the Federal Reserve’s plans to tighten monetary policy.
The Dow Jones Industrial Average fell 280 points, or 0.8%. The S&P 500 fell 0.4% and the Nasdaq Composite dipped 0.4% after falling more than 2% on Wednesday.
Consumer staples and health care companies rose slightly on Thursday as investors continued their search for safe-haven stocks, which included Walmart, Merck and Procter & Gamble. On the tech front, shares of HP Inc surged 13% after Warren Buffett’s Berkshire Hathaway disclosed a stake in the tech hardware maker.
Investors also digested initial jobless claims on Thursday, which came in at 166,000 last week, their lowest level since 1968, and signaled the job market remains under pressure.
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.
“It does seem like they are talking up the possibility of raising rates by 50 basis points at the next meeting so the hope is that message is well telegraphed in advance,” said Brian Price, head of investment management at Commonwealth Financial Network. “I expect that volatility will remain elevated for the time being as there is a lot of uncertainty for investors to digest right now.”
Investors continue to monitor the Ukraine-Russia war, as Ukraine asks NATO for more weapons, and crude prices ticked higher after falling in the previous session. U.S. oil gained 1.1% to $97.39 per barrel, while international Brent advanced 0.9% to $101.95.