U.S. stocks fell in volatile trading Wednesday after Federal Reserve Chairman Jerome Powell suggested the central bank has plenty of room to raise interest rates before it would harm the economy.
The Dow Jones Industrial Average fell 330 points, or 1%. The Dow was up more than 500 points earlier in the session. The S&P 500 fell 0.9%. The Nasdaq Composite dipped 0.8%.
Stocks came off their highs and Treasury yields jumped to their highs after Powell said at a press conference there was “quite a bit of room” to raise rates before it would hurt the labor market.
Powell also said prices could continue to run higher as “inflation risks are still to the upside.”
The Fed signaled in a statement Wednesday following its policy group’s January meeting that a quarter-percentage-point increase to its benchmark short-term borrowing rate could be coming as soon as March, as market participants expected.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Federal Open Market Committee statement said. The Fed does not meet in February.
Stocks rose initially after that statement and before Powell’s speech. However, the market began to gyrate as Powell spoke, continuing a pattern of volatility this week in markets.
Loading chart…
The Fed also indicate in a separate statement that it would begin shrinking its balance sheet after hiking rates, a further tightening action that many traders may have hoped the central bank would have held off doing right away.
Meanwhile, investors digested a strong quarterly report from Microsoft and other corporate earnings results.
Shares of Microsoft rose 2% after the company issued better-than-expected quarterly revenue guidance, boosting the three major indexes.
Microsoft’s “conference call went well and ignited the market,” Scott Redler of T3Live said. Whether the stock’s rally holds “will tell us a lot about tech,” he added.
On the downside, Boeing fell 2.6% after the aircraft maker reported positive cash flow for the first time since 2019, but it took a $3.5 billion pre-tax charge on its 787 Dreamliner program.
U.S. stocks saw a second consecutive roller-coaster trading session Tuesday.
The Dow ended Tuesday lower, but was down as much as 818.98 points on the session and briefly traded up by as much as 226.54 points. Those moves came a day after the Dow recovered from a 1,115-point deficit to post a slight gain.
The S&P 500 and Nasdaq Composite also closed well off their session lows on Tuesday, but still lost 1.2% and 2.3%, respectively.
All three major indexes are negative in January. The Nasdaq is in correction territory, down more than 17% from its intraday high.
—CNBC’s Patti Domm contributed to this report.
