The Dow Loses 200 Points as Increasing Yields Fuel Worries of a Recession

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Last Updated on November 18, 2022 by Bitfinsider

Stocks declined on Thursday as Federal Reserve policymakers signaled that interest rate hikes to combat inflation are far from complete.

The Dow Jones Industrial Average decreased by 0.6%, or 213 points. The S&P 500 decreased by 1%, whilst the Nasdaq Composite decreased by 0.9%.

President of the Federal Reserve Bank of St. Louis James Bullard stated in a speech on Thursday that the policy rate is not yet in a suitably restricted range.

“The adjustment in the monetary policy stance appears to have had very limited effects on observed inflation,” stated Bullard. “However, market pricing indicates that deflation is projected in 2023.”

The 2-year Treasury yield surged to 4.437% on Thursday morning, sparking fears that increased interest rates will cause a recession.

Esther George, president of the Kansas City Federal Reserve, told the Wall Street Journal on Wednesday, “I don’t know how you continue to get this level of inflation down without having a major slowing, and maybe even a contraction in the economy to get there.”

Recession-sensitive stocks and rising interest rates caused the declines. Materials stocks and consumer discretionary stocks dropped.

“Additional monetary tightening and the cumulative impact of this year’s rate hikes indicate that recession risks remain elevated,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note. “We continue to believe that the macroeconomic prerequisites for a lasting rally, such as interest rate decreases and a growth and earnings trough, are not yet in place.”

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