Wall St ends as Powell announces 50 basis point rate hike on table

  • Fed’s Powell says 50bp rate hike ‘on the table’
  • United Airlines and American Airlines pounce on earnings outlook
  • Tesla rises after best estimates for first-quarter results
  • Markets give up early day gains to end lower
  • Indices down: Dow 1.05%, S&P 1.48%, Nasdaq 2.07%

April 21 (Reuters) – Wall Street ended lower Thursday, the Nasdaq falling more than 2%, as investors reacted to officials of the Federal Reserve, including President Jerome Powell still offers hikes arrowing aggressive interest rates this year.

An increase of half a percentage point in interest rates will be “on the table” when the US central bank will meet on 3 and 4 May to approve the next in what should be a series of rate increases this year, Powell said.

With inflation at nearly three times the 2% target Fed “should act a little faster,” added Powell during a discussion on the world economy at the meetings of the Fund International monetary. Read more

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“The market is pricing at least 50 basis points in May and June,” said George Catrambone, head of trading at DWS Group.

“Powell, and many other Fed speakers, have said they want to take control as quickly as possible, and that tells the market that they are going to act aggressively.”

Earlier on Thursday, the president of the Federal Reserve of San Francisco, Daly said it supported the increase in the objective of the US central bank for borrowing costs daily to 2.5% by the end of this year, but if or how it will further increase will depend on what happens with inflation and labor markets. Read more

Remarks from Fed officials deflected the initial boost markets had received thanks to positive earnings. All three major indexes opened higher, boosted by strong results from heavyweight Tesla (TSLA.O) and airline operators.

However, the gains were eroded during the morning session and the S&P 500 and Nasdaq had already reversed course by the time Powell spoke.

The Dow Jones Industrial Average (.DJI) fell 368.03 points, or 1.05%, to 34,792.76, the S&P 500 (.SPX) lost 65.79 points, or 1.48%, to 4,393.66 and the Nasdaq Composite (.IXIC) fell 278.41 points, or 2.07%, to 13,174.65.

A Wall Street sign is pictured outside the New York Stock Exchange in the Manhattan borough of New York, New York, U.S., April 16, 2021. REUTERS/Carlo Allegri/File Photo

Bond yields also hit new multi-year highs. Yields on two-year US Treasuries, the most sensitive to interest rate fluctuations, rose to their highest level in three years before falling slightly.

High-growth stocks, including those of Alphabet Inc (GOOGL.O) and Amazon.com Inc (AMZN.O), fell as investors worried about the impact of the rate environment higher on their future growth potential. Meta Platforms Inc (FB.O) fell 6.2%, taking its losses over the past two days to 13.5%.

Netflix Inc (NFLX.O) fell 3.5%, taking its market capitalization is less than the $ 100 billion mark for the first time since January 2018. It was down for the second day after its giant Rolling quarterly results revealed the first drop in subscriber numbers in a decade, with further drops likely. Read more

The forecast prompted William Ackman to liquidate a $1.1 billion bet on Netflix, with the billionaire investor writing that the company’s future was too uncertain to hold his position. Read more

The 1.7% drop in the broad technology index (.SPLRCT) was one of the worst among sectors, with all 11 major industries ending lower. Energy (.SPNY) was the hardest hit, despite rising crude prices.

Alcoa Corp (AA.N) was another to slip after reporting results. The aluminum producer fell 16.9%, its biggest fall since March 2020, as the Russian-Ukrainian conflict impacted its business.

However, there were some positives. Tesla’s most valuable carmaker in the world, rose 3.2% after its results have exceeded the expectations of Wall Street, rising prices have helped to overcome the chaos in the supply chain and rising costs. Read more

Airline stocks also maintained their recent momentum. United Airlines Holdings Inc (UAL.O) and American Airlines Group Inc (AAL.O) climbed 9.3% and 3.8%, respectively, after predicting a return to profits in the current quarter due to the explosion in demand for travel. Read more

Volume on U.S. exchanges was 12.27 billion shares, compared to an average of 11.65 billion for the full session over the past 20 trading days.

The S&P 500 posted 78 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 73 new highs and 367 new lows.

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Reporting by Bansari Mayur Kamdar, Sruthi Shankar and Amruta Khandekar in Bengaluru and David French in New York; Editing by Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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