Dow Drops 700 Points as Recession Fears Rise By Investing.com

By Liz Moyer

Investing.com — U.S. stocks slumped Thursday, but ended their day’s lows as investors reacted to the Federal Reserve’s rate hikes for longer interest rates.

At 16:02 ET (21:02 GMT), the price was down 764 points or 2.3%, while the price was down 2.4% and down 3.2%. The Dow was down more than 900 points during the day.

The Fed released a new set of forecasts on Wednesday showing that inflation remains high, while it expected gross domestic product growth to slow as unemployment rises.

The Fed said on Wednesday that its benchmark rate was likely to move above 5%, higher than expected a few months ago, and signaled that it was not inclined to pause or pivot to rate cuts any time soon. That put pressure on equities, as investors had hoped the tide would turn sometime in 2023. It also fuels fears that the Fed’s aggressive stance will push the economy into recession next year.

The central bank raised interest rates by half a percentage point as expected, slower than the pace of rate hikes at its four previous meetings this year. Chairman Jerome Powell said there are some signs of inflation cooling, but not enough to convince policymakers that inflation was on a sustainable path towards the 2% target.

Traders expect two more rate hikes next year, each of at least a quarter of a percentage point.

The gloomy outlook casts a dark shadow on growth stocks, especially technology stocks. Shares of Apple Inc (NASDAQ:) fell 4.7%, while Amazon.com Inc (NASDAQ:) fell 3.4% and Microsoft Corporation (NASDAQ:) fell more than 3%.

Data on Thursday pointed to a stronger-than-expected decline in retail sales. Meanwhile, new jobless claims fell last week and were lower than expected. Both the European Central Bank and the Bank of England raised interest rates by half a percentage point.

Roblox Corp (NYSE:) shares fell 15% after it reported November numbers showing slowing growth. Novavax Inc (NASDAQ:) shares fell more than 34% after it announced a $125 million offer for common stock and a $125 million offer for convertible debt.