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- Stocks continued their steep decline Thursday, a day after the Federal Reserve raised rates.
- The Fed signaled it expects to hike rates twice in 2019. It previously had expected three rate hikes next year.
- Watch the major US indexes trade in real time here.
The Dow Jones Industrial Average plunged about 2%, or more than 450 points, to its lowest level in 14 months. The Nasdaq Composite shed 1.6% and briefly dipped into a bear market, defined as a fall of more than 20% from recent peaks, for the first time since the financial crisis. The S&P 500 fell 1.6%.
Technology shares, which had led the latest bull run, were among the biggest losers, with Amazon, Apple, and Netflix falling at least 2% each. Google parent-company Alphabet was nearly 1% lower. After being called “toxic” by Citron Research, shares of Twitter sank more than 11%.
A bruising sell-off had started Wednesday after the Federal Reserve raised its benchmark interest rate a quarter percentage point and signaled it would take a tentative approach to setting monetary policy next year.
“Yesterday, there is no doubt that markets were expecting a bailout from the Fed—and threw a tantrum when they didn’t get it,” said Brad McMillan, chief investment officer of Commonwealth Financial Network. “Powell put the markets on notice that the Fed will be much less willing to shape monetary policy in order to support asset prices.”
Concerns about the potential for a partial government shutdown this weekend also weighed on Wall Street, after President Donald Trump told congressional leaders he will not sign a government funding bill because of a dispute over his long-promised border wall.
The VIX — a measure of expected volatility — jumped more than 14% to at 29.22, its highest level since February. Also known as Wall Street’s “fear index,” the Cboe Volatility Index tends to rise when stocks are down.
Not helping the mood, oil prices fell to their lowest level in more than a year, even after the US reported a drawdown in inventories for a third straight week. West Texas Intermediate was trading just under $46 per barrel, and Brent around $54.70. Worries about oversupply have helped send prices deep into bear territory, down nearly 40% from their October highs.
The dollar slid 0.75% against a basket of major peers. Against the Japanese yen, the greenback weakened 1.4%. The yield on the 10-year Treasury note continued to edge lower, down 1.4 basis points to 2.762%.
“The price action reflects the unwind of easy money and years of financing engineering, though the Fed’s not sure how soon (or much) this spills into the real economy,” Mark McCormick, an analyst at TD Securities, said in an email. “What’s clear to us, however, is that this backdrop reinforces the steady climb down in the broad USD.”