- Stocks Plummet to 22-Month Low as Fed Hawks Circle
- Wall Street’s fear gauge has been showing signs of concern
- Intervention from BOE provided only temporary relief
US stocks plunged to the lowest since November 2020 as another group of Federal Reserve officials struck a hawkish tone, and turmoil in Europe continued to fray investor nerves.
The S&P 500 fell as much as 2.9% during Thursday’s session but trimmed losses as markets closed. Its decline wipes out an ill-timed attempt Wednesday to rebound from a six-day slide.
The tech-heavy Nasdaq 100 dropped nearly 4% during the session after St. Louis Fed President James Bullard said investors have now understood that they can’t escape additional rate hikes in coming months. The index was dragged down by Apple Inc., which fell as much as 6.1% after a rare analyst downgrade from Bank of America warning of weaker consumer demand for its popular devices.
Signs of stress emerged in the interest-rate swaps market and a leveraged-buyout deal was shelved. US Treasuries pared earlier losses, with the 10-year yield hovering around 3.76%.
In Europe, UK gilt yields rose after Prime Minister Liz Truss’s defence of unfunded tax cuts that sent markets into turmoil failed to persuade investors. German inflation topped 10% and the country agreed to energy caps that could add to inflationary.
Better-than-expected 2Q core PCE and personal consumption numbers on Thursday also paved the path for the Fed to stay aggressive. Weekly jobless claims fell to the lowest since April, showing a persistently tight labour market.
Separately, the European Commission announced an eighth package of sanctions that would include a price cap on Russia’s oil exports as Russia vowed to go ahead with the annexation of the parts of Ukraine that its troops currently control after UN-condemned votes, putting the Kremlin on a fresh collision course with the US and its allies.