Stocks fell again on Thursday, following back-to-back losing sessions, as traders weighed the Federal Reserve’s plans to tighten monetary policy.
The Dow Jones Industrial Average fell 160 points, or 0.5%. The S&P 500 fell 0.4% and the Nasdaq Composite dipped 0.85% after falling more than 2% on Wednesday.
“The moves are not surprising,” said Timothy Lesko, senior wealth advisor at Mariner Wealth Advisors. “You have a marketplace that is trying to get its head around what valuations should be in a higher interest rate environment. Every piece of economic news that comes out changes that forward expectation at the margin and the market needs to figure that out.”
Consumer staples and health care companies rose slightly on Thursday as investors continued their search for safe-haven stocks, which included Walmart, Merck and Procter & Gamble. On the tech front, shares of HP Inc surged 16% after Warren Buffett’s Berkshire Hathaway disclosed a stake in the tech hardware maker, while semiconductors like Nvidia and AMD declined for their third day.
Industrial and real estate stocks like Honeywell, UPS and General Electric were among the worst performers, dipping 2% each as investors worried recent moves from the Fed could slow the economy. Home Depot and Lowe’s both fell about 1%.
“The S&P 500 has come under pressure over the past couple of sessions, however key support at 4455/50 is still holding for now,” wrote Credit Suisse’s David Sneddon. “Only a break below here would turn the short-term risks back lower in the range. Particularly concerning is that volume has been ticking up as the market falls.”
Investors also digested initial jobless claims, which came in at 166,000 last week, their lowest level since 1968, and signaled the job market remains under pressure.
Thursday’s moves come after the Fed released minutes from its March meeting on Wednesday, which showed that officials planned to reduce their trillions in bond holdings with a consensus amount around $95 billion. Meanwhile, policymakers indicated that one or more 50 basis-point interest rate hikes could be warranted to battle surging inflation.
“The minutes from the latest FOMC meeting portray a higher level of urgency than previous communication as the Fed has circled on a commitment to run the balance sheet down faster than market participants may have expected,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
Officials “generally agreed” that a maximum of $60 billion in Treasurys and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months and likely starting in May.
The news sent the blue-chip Dow down more than 100 points Wednesday, while the S&P 500 slid 1%. The tech-heavy Nasdaq Composite dropped another 2.2%. Those losses came after comments from Fed Governor Lael Brainard pushed stock prices lower on Tuesday.
“It does seem like they are talking up the possibility of raising rates by 50 basis points at the next meeting so the hope is that message is well telegraphed in advance,” said Brian Price, head of investment management at Commonwealth Financial Network. “I expect that volatility will remain elevated for the time being as there is a lot of uncertainty for investors to digest right now.”
Investors on Thursday continued to monitor the Ukraine-Russia war, as Ukraine asks NATO for more weapons and the EU and U.S. weigh a ban on Russian coal following evidence of potential war crimes committed by Russia’s military. Meanwhile, the U.S. Senate passed a bill banning Russian oil and gas imports.
Crude prices, which have been volatile amid the war in Ukraine, continued their descent from the previous session on Thursday. U.S. oil fell 1.5% to $94.80 per barrel, while international Brent slid 1.9% to $99.16.
Major averages suffered a two-day losing streak as investors digested the Federal Reserve’s plans to tighten monetary policy.