Wall Street Down 2nd Week in Row Amid US Interest Rate Hike Fears

NEW YORK (Sputnik) - Wall Street tumbled for a second week in a row after Federal Reserve Bank of New York President John Williams said that doubling down on interest rates was a “reasonable option” for battling inflation, intensifying worries that the economy might go into recession due to the central bank’s actions.

The three major US stock indexes - the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite - fell by an average of 1.2% at Thursday’s close. On a weekly basis, they were down 2.2% on the average, closing the week a day earlier than usual due to the Good Friday holiday.

Stocks lost in three of the week’s four sessions while Treasury yields rose on speculation that the Fed will raise interest rates aggressively to combat decades-high inflation. The expiration of stock options on Thursday amplified equity market movements.

In Thursday’s trade, the yield on the ten-year US Treasury note topped 2.8% after Williams said that speeding up the pace of monetary tightening to include half-percentage-point hikes is a reasonable option.

The S&P 500 - which groups the top 500 US stocks - finished the day down 54 points, or 1.2%, at 4,393. For the week, it fell 2.4%.

The Nasdaq Composite - which houses the biggest technology names of the world, including Amazon, Apple, Netflix and Google - closed Thursday down 293 points, or 2.1%, at 13,351. For the week, the Nasdaq lost 3.9%.

The Dow, which lists travel, aviation and cross-industry value stocks, settled the day down 113 points, or 0.3%, at 34,451. For the week, the Dow fell 0.4%.

Unrelenting inflation pressure has forced Federal Reserve policy-makers to embark on the fastest pace of interest rate hikes in 40 years to measure up to price growth.

After slashing rates to nearly zero at the height of the COVID-19 outbreak, the central bank's policy-making Federal Open Market Committee, or FOMC, approved the first pandemic-era rate hike on March 16, raising rates by 25 basis points, or a quarter point

Many FOMC members have concluded since that the hike was too tame to rein in inflation galloping at its fastest pace since the 1980s and that more aggressive increases of 50 basis points may be needed in the future.

The central bank’s typical target for inflation is just 2% a year - a level it considers “neutral.” To get to this, it envisages that it will need six more rate hikes this year - one every monthly FOMC meeting.