Dow Futures Slump After Fed’s Big Hike — and What Else Is Happening in the Stock Market Today

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Federal Reserve Chairman Jerome Powell (Photo by JIM WATSON/AFP via Getty Images)

Stock futures were falling Thursday after the Federal Reserve boosted interest rates the most since 1994, and signaled to Wall Street it would remain aggressive in its campaign to cool historically high inflation.

Contracts linked to the Dow Jones Industrial Average fell 457 points, or 1.5%, to 30,194, S&P 500 futures were down 1.9% and Nasdaq futures declined 2.2%.

Stocks rose Thursday after the Fed agreed to increase interest rates by three-quarters of a percentage point, and Fed Chairman Jerome Powell suggested the central bank could hike rates by that much again next month to control inflation that is running at 40-year highs.

Powell, however, also said the big rates hikes was “an unusually large one” and that Fed officials “do not expect moves of this size to be common.”

“Hopes that the Fed would hike at a less angry pace over the rest of the year was enough for the downtrodden buy-the-dippers to flock back into the market,” said Jeffrey Halley, senior market analyst at Oanda. “Markets like their large rate hikes to be rare and not well done.”

Stocks had come into the Federal Reserve meeting on a five-day losing streak that sank the S&P 500 by about 10%.

The yield on the 10-year Treasury traded lower to 3.364%, below its multiyear closing high of 3.482% that was hit on Tuesday.  

The moves from the central bank on Wednesday increased the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%. Fed officials expect the benchmark rate to end the year at 3.4%, and 3.8% by the end of 2023.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the main takeaway for investors was that “inflation has the Fed’s attention and that they are taking it very seriously.”

Zaccarelli said he’s not convinced the worst is behind she stock market and the economy because they “still face considerable headwinds.”

But, he added, “at least in the short run, we may be entering a more optimistic phase in this market cycle.”

Write to Joe Woelfel at joseph.woelfel@barrons.com