- Stocks continued their steep decline Thursday, a day after the Federal Reserve raised rates.
- The Fed signaled it expects to hike rates twice in 2019. It previously had expected three rate hikes next year.
- Watch the major US indexes trade in real time here.
The Dow Jones Industrial Average plunged 1.8%, or more than 400 points, to its lowest level in 14 months and below 23,000. The Nasdaq Composite was down 1.05% and flirting with bear-market territory, meaning it was down almost 20% from its recent peak, for the first time since the financial crisis. The S&P 500 fell 1.6%, meanwhile, dragged lower by technology and energy companies.
A bruising sell-off had started Wednesday after the Federal Reserve raised its benchmark interest rate a quarter percentage point and signaled it would take a tentative approach to setting monetary policy next year.
“Yesterday, there is no doubt that markets were expecting a bailout from the Fed-and threw a tantrum when they didn’t get it,” said Brad McMillan, chief investment officer of Commonwealth Financial Network. “Powell put the markets on notice that the Fed will be much less willing to shape monetary policy in order to support asset prices.”
The VIX – a measure of expected volatility – jumped more than 14% to at 29.22, its highest level since February. Also known as Wall Street’s “fear index,” the VIX tends to rise when stocks are down.
Not helping the mood, oil prices fell to their lowest level in more than a year, even after the US had reported a drawdown in inventories for a third straight week. West Texas Intermediate was trading just under $46 per barrel, and Brent around $54.70. Worries about oversupply have helped send prices deep in bear territory, down nearly 40% from October highs.
The dollar slid 0.75% against a basket of major peers. Against the Japanese yen, the greenback weakened 1.4%. The yield on the 10-year Treasury note continued to edge lower, down 1.4 basis points to 2.762%.
“The price action reflects the unwind of easy money and years of financing engineering, though the Fed’s not sure how soon (or much) this spills into the real economy,” Mark McCormick, an analyst at TD Securities, said in an email. “What’s clear to us, however, is that this backdrop reinforces the steady climb down in the broad USD.”