Wall Street was weighed down by the Fed, the Dow Jones’ biggest drop in 3 months

The Star Index fell more than 3% to 32,283.40 points. At the same time, the Nasdaq fell almost 4% to 12,141.71 points and the S&P 500 fell 3.37% to 4,057.66 points.

The New York Stock Exchange closed sharply lower on Friday, weighed down by the Promises by Federal Reserve Board President Jerome Powell raise interest rates further and keep them high over the long term in order to calm inflation.

The Dow Jones fell 3.03%, 32,283.40 points, and fell more than 1,000 points, its worst single-session performance since mid-May, more than three months. The Nasdaq index fell 3.94% to 12,141.71 points and the broader S&P 500 index fell 3.37% to 4,057.66 points.

At the end of this disastrous session, the S&P 500 returned to its lowest closing level in a month.

Jerome Powell on Friday clearly stated his determination to continue the tightening cycle to curb rising prices, to the point of pursuing monetary policy “sufficiently restrictive to bring inflation down to 2%”, that is, the voluntarily slowing down the economy.

The trained lawyer and former investment banker also indicated that this restrictive monetary policy, which corresponds to high interest rates, is likely to last “for some time”.

The return to price stability will lead to “a long period of weaker growth” and “a slowdown in the labor market,” the central banker hammered at the Jackson Hole (Wyoming) symposium to the major annual central banker.

“Markets are reacting this way not because Chairman Powell’s speech was blunt, but because the last resort of “repositioning” and short-term monetary easing by the Fed has been ruled out,” explained Keith Buchanan (of Globalt Investments).

Following Jerome Powell’s much-anticipated exit, traders were mainly betting on another 0.75 percentage point hike in the Fed’s benchmark rate, which would be the third in a row at their next meeting on September 21-22.

In the bond market, the 3-month Treasury yield, a maturity that is more sensitive to fluctuations in monetary policy than the 10-year, hit its highest level in almost 14 years at 2.82%.

That hit to interest rates has burned tech stocks, which are heavily dependent on credit conditions as they need to find financing to fuel their growth.

Amazon (-4.76%), Alphabet (-5.44%) and even Apple (-3.77%) collapsed, as did graphics card manufacturer Nvidia (-9.23%) and software manufacturer Adobe (-5.67 %).

The VIX index, which measures market volatility, rose more than 17% on Friday.

The Federal Reserve’s continued offensive “radically reduces the likelihood of a soft landing” for the economy, Cornerstone Wealth’s Cliff Hodge said, “and with it the chances of an upside scenario and new highs” in the stock market by the end of the year.

However, “this doesn’t necessarily mean we’re going back to 2022 lows, which dated mid-June,” added the analyst, who expects “troubled, tight-margin markets” in the coming months and advocates a “defensive stance.” versus stocks.

According to the PCE index released on Friday, Jerome Powell’s authoritative message eclipsed the string of strong US indicators that initially carried the market, notably the slight month-on-month decline in US prices in July.

The 1-year inflation rate fell to 6.3% from 6.8% in June.

Another encouraging number, the consumer confidence index, compiled by the University of Michigan, rose sharply in July, well above expectations. In addition, consumers have revised downwards their inflation forecasts for the one- and five-year horizon.

On the side, Electronic Arts gained height (+3.57% to $132.17), buoyed by information from Swedish media GLHF that Amazon is close to a takeover bid for the video game publisher.

American conglomerate 3M (-9.65% to $128.98) was hit hard by a decision by an Indiana federal judge who believed the bankruptcy of its Aero Technologies subsidiary did not keep it safe from military-related lawsuits Earplugs protected and accused of being defective.

Targeted, like its German partner BioNTech, by a lawsuit filed by Biotech Moderna (-3.77%) for patent infringement, Pfizer fell 2.21% to $46.84. The case concerns patents related to the so-called messenger RNA technology, which enabled the accelerated development of the first vaccines against COVID-19.

Computer maker Dell Technologies suffered (-13.53% to $41.42) after reporting quarterly revenue below expectations, coupled with cautious second half commentary and a slowdown in demand.

Online installment payment specialist Affirm (-21.33% to $24.57) posted a larger-than-expected loss after the market closed the day after the release, and rated forecasts for its current fiscal year as disappointing.

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