Stocks plummeted Thursday, erasing the brief reprieve delivered just one day prior and handing investors one of the worst days since 2020.
The Dow Jones Industrial Average dropped by 3.12 per cent, losing 1,063 points to close at 32,997.97, while the Nasdaq Composite dropped by 4.99 per per cent finishing the trading day at 12,317.69. For both, these were the worst single-day drops experienced since 2020.
The losses arrived on the heels of investors digesting the Federal Reserve’s move to raise the benchmark interest rate by half a percentage point, the second time this year an increase has been announced, with both increases being prompted by economic leaders hoping to rein-in what is shaping up to be the worst inflation crisis in the US in the past four decades.
Yesterday’s losses marked the second-worst day for the S&P 500 since June 2020, while it was the worst day for the Nasdaq since that same month, according to FactSet.
To put Thursday’s overall losses into perspective, this was the worst showing of US stocks since March 2020 when the Covid-19 pandemic sent most of the world into a months-long lockdown and the Dow slid by 1,191 points in its largest nosedive since the financial crisis of 2008.
The out-of-control inflation in the US, which has been steadily rising throughout the year, up 8.5 per cent in March compared to the same time last year, is partially being triggered by the ongoing invasion of Ukraine by Russia and the knock-on effects of China’s Covid-19 lockdowns, which have hampered the global supply-chain once again.
“The Committee is highly attentive to inflation risks,” the Federal Open Market Committee said this week in its latest policy statement.
Speaking after the most recent interest rate hike, Federal Reserve Chairman Jerome Powell reassured investors that he was confident in the economy and believed the country could avoid a recession and make a soft or “softish” landing.
“The economy is strong, and it’s well positioned to handle tighter monetary policy,” Mr Powell said. “I do expect this will be very challenging, it’s not going to be easy, and it may well depend of course on events that are not under our control.”