US stock indices plunged Thursday, with growth stocks bearing the brunt of the sell-off after the Federal Reserve’s biggest rate hike since 1994 to combat decades-long high inflation fueling concerns about a recession.
All 11 major S&P sectors fell in morning trading. The energy and consumer discretionary sectors were the biggest losers, down 4.2% and 3.6% respectively.
Mega-cap growth companies Amazon.com, Microsoft Corp , Apple Inc and Tesla Inc fell between 2.5% and 6%, also under pressure from rising US Treasury yields.
At 9:56 a.m. ET, all Dow components were in the red, while 496 components of the S&P 500 index fell.
The benchmark index saw a five-session loss on Wednesday after the Fed’s 75 basis point rate hike came in line with market expectations.
Equities were weighed down for most of the year by mounting concerns about rising inflation and higher borrowing costs, with the central bank’s latest forecast of a slowing US economy and rising unemployment in the coming months only fueling those concerns.
“We consider it increasingly likely that a recession and higher unemployment will be necessary to tame inflation with such a bleak macro picture looming over the markets,” said Geir Lode, head of global equities at Federated Hermes Ltd.
Wells Fargo said the odds of a recession are now more than 50% following the Fed’s decision.
The S&P 500 is down 22.6% since the start of the year and is in a bear market as investors grapple with a sharp slowdown in growth. The Nasdaq Composite and S&P 500 indices would mark their 10th weekly decline in the past 11 weeks.
“Technically, the market remains weak,” said Peter Cardillo, chief economist at Spartan Capital Securities in New York.
The Fed rally is fading as investors question the central bank’s ability to orchestrate a soft landing. The bear market is still in full swing and has yet to reach a level where stocks can bounce comfortably. †
At 9:56 a.m. ET, the Dow Jones Industrial Average fell 692.04 points or 2.26% to 29,976.49, the S&P 500 fell 105.57 points or 2.79% to 3,684.42 and the Nasdaq Composite fell 355 .94 points or 3.21%, at 10,743.21.
At the major US banks, Morgan Stanley led losses with a 4% decline.
The CBOE volatility index, also known as the Wall Street fear meter, rose to 31.51 points.
The number of declining issues surpassed the avant-garde by a 15.15-to-1 ratio on the NYSE and a 7.14-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week highs and 78 new lows, while the Nasdaq recorded three new highs and 400 new lows.