The surge in stocks that followed the Federal Reserve decision proved short lived, with traders worried that officials could struggle to fight persistently high inflation amid the lingering threat of a recession.
Just a day after notching the biggest rally in two years, the S&P 500 headed toward its worst session since June 2020 — with 95% of its companies moving lower.
The Nasdaq 100 was on track for one of its sharpest U-turns ever. The tech benchmark plunged more than 5%, wiping out its post-Fed gains. A selloff in long-end Treasuries pushed the 10-year yield above 3%. The dollar climbed.
Doubts policy makers can arrest runaway prices are rocking markets after Wednesday’s relief rally, with the prospect of stagflation unsettling investors. By pushing back on a jumbo-hike of 75 basis points in June, Fed Chair Jerome Powell beat back traders’ most-aggressive predictions for interest rates.
However, he may also have set the stage for more turbulence. It’s still a bumpy road ahead, with pivotal economic data and global developments due within days that could seed doubts about the central bank’s approach.