Stocks closed broadly lower on Wall Street Wednesday after Federal Reserve Chair Jerome Powell signaled that the central bank will eventually need to bring rates higher than previously anticipated in order to tame the worst inflation in decades. The Fed also announced its fourth straight extra-large rate increase of three-quarters of a percentage point as it fights the worst inflation in decades. The higher rates are intended to cool the economy, but markets fear the Fed may go too far and cause a recession. The S&P 500 fell 96.41 points, or 2.5%, to 3,759.69. The Dow Jones Industrial Average fell 505.44 points, or 1.5%, to 32,147.76. The Nasdaq fell 366.05 points, or 3.4%, to 10,524.80. The Russell 2000 index of smaller companies fell 62.25 points, or 3.4%, to 1,789.14.
The market rallied briefly after the central bank released a statement that seemed to suggest it could ease back on the rate-increase program, the AP reports. But any encouragement that gave investors faded when Powell said during a press conference that the central bank would rather make a mistake of taking interest rates too high than easing too quickly, noting that a premature pullback on rate hikes could lead inflation to become entrenched. "It’s very premature, in my view, to think about or to be talking about pausing our rate hikes," Powell said. "We have a ways to go." The Fed’s move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years.
The 11 sectors in the S&P 500 were in the red after shedding all their gains after the brief rally following the Fed statement. Technology stocks and retailers were among the biggest weights on the index. Drugstore operator CVS rose 2.3% after raising its profit forecast following a strong third quarter. Short-term vacation rental marketplace Airbnb fell 14.6% after warning investors that bookings growth will slow in the fourth quarter. Beauty products maker Estee Lauder slid 8.1% after slashing its profit forecast as COVID-19 lockdowns in China and inflation hurt business.
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