The 10-year yield “continues to climb painfully, under an increasingly aggressive Federal Reserve,” said Ross Mayfield, investment strategy analyst at Baird. “Until last weekend, I hadn’t seen any speculation of two rate hikes at the March meeting, and now you’re starting to hear that chatter.”
The S&P 500 fell 85.74 points to 4,577.11, the Dow fell 543.34 points to 35,368.47 and the Nasdaq fell 386.86 points to 14,506.90. The indices all hit new lows for the year. The Nasdaq bore the brunt of the losses, shedding 7.3% this month. That puts the index within 2.7% of a correction, Wall Street speaks of when a stock or index falls 10% or more from its last high. The S&P 500 is down nearly 4% for the month after hitting an all-time high on the first trading day of the year.
The latest wave of selling comes as Wall Street tries to predict how much the Fed will raise interest rates and how quickly. The central bank has accelerated its plan to reduce bond purchases and plans to raise interest rates sooner and more often than Wall Street had expected.
The Fed is under pressure to reduce inflation, which surged last month at its fastest pace in nearly 40 years. Meanwhile, the labor market rebounded from last year’s brief but intense coronavirus slump, leaving the unemployment rate at a pandemic low of 3.9% last month, giving the central bank more than leeway to curb the unprecedented support it has provided to the economy. since the pandemic hit.
While higher rates could help stem the high inflation sweeping the world, they would also signal an end to the conditions that have put financial markets in “easy mode” for many investors since the start of 2020.