Stock Market News for Sep 22, 2022

U.S. stocks ended sharply lower on Wednesday in a volatile trading session as the Fed increased interest rates by 75 basis points and indicated more sizeable rate hikes into 2023 in its fight to control surging inflation. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 1.7% or 522.45 points to close at 30,183.78 points.

The S&P 500 shed 1.7% or 66 points to finish at 3,789.93 points. Communication services, consumer discretionary and materials stocks were the worst performers.

The Communication Services Select Sector SPDR (XLC) declined 2.5%. The Consumer Discretionary Select Sector SPDR (XLY) and the Materials Select Sector SPDR (XLB) lost 2.4% and 2.2%, respectively. All 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq tumbled 1.8% or 204.86 points to end at 11,220.19 points.

The fear-gauge CBOE Volatility Index (VIX) was up 3.06% to 27.99. A total of 11.03 billion shares were traded on Wednesday, higher than the last 20-session average of 10.79 billion.

Markets Suffer on Another Rate-Hike Announcement

Investors were bracing for a steep interest rate hike and the Fed at the end of its two-day policy meeting quite expectedly hiked interest rates by 75 basis points for the third time to take it to 3% to 3.25% range. The majority of the investors were expecting such an increase, while some even had been expecting a 100-basis point hike.

The Fed also gave a clearer picture this time of its future plans and signaled more increases in interest rates into 2023. Policymakers also said that they plan to increase interest rates by another 125 basis points by the end of this year, which would take the benchmark interest rate to a midpoint of 4.40%, before topping it out at 4.60% in 2023.

Moreover, the Fed doesn’t plan any rate cuts until 2024, dashing hopes of investors that the aggressive rate hike stance could lead to getting inflation under control in the near term.

Investors already knew that a steep rate hike was coming but they had also been hoping to get a clear picture of what the Fed was planning with its future rate hikes.

On Wednesday, stocks see-sawed between gains and losses almost throughout the day as they digested the fresh round of rate hikes and Fed Chair Jerome Powell’s hawkish comments. However, Wall Street slumped in the final 30 minutes of the trading after investors realized that the projection made by the Fed painted a gloomy picture of the economy.

The Dow at its session high was up 314 points but then ended up losing more than 550 points. The S&P 500 ended Wednesday more than 10% down from its past month.

Treasury Yields Climb

Following the interest rate-hike announcement Treasury yields jumped. The 10-year Treasury yield jumped to nearly 3.6% at the session’s highs. The 2-year Treasury yield rose to 4.1%, its highest level since October 2007.

Travel and entertainment stocks took a massive hit following the announcement. 18 of the 20 worst performers on the S&P 500 index on Wednesday were travel and entertainment stocks. Shares of Carnival Corporation & plc CCL tumbled 6.8%, while Royal Caribbean Cruises Ltd. RCL plunged 5.5%. Carnival Corporation & plc has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Shares of Wynn Resorts, Limited WYNN fell 5.6%, while Hilton Worldwide Holdings Inc. HLT declined 5.4%.

Economic Data

In economic data released on Wednesday, the National Association of Realtors said that existing home sales declined 0.4% in August month over month to a seasonally adjusted annual rate of 4.80 million units. This was the slowest pace since May 2020, when home sales had come to a standstill due to the outbreak of the COVID-19 pandemic.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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