The stock market moved sharply lower on Thursday, reversing all of its gains from the previous session when the Federal Reserve raised interest rates by a half-percentage point, as volatility remains elevated and investors continue to worry about risks to economic growth.
The market recorded its worst day since 2020: The Dow Jones Industrial Average was down nearly 3.1%, over 1,000 points, while the S&P 500 lost 3.6% and the tech-heavy Nasdaq Composite 5%.
Thursday’s declines reversed all of the market’s gains from a day earlier, when investors cheered a widely anticipated half-percentage point interest rate hike from the Federal Reserve—the largest increase in over two decades.
Despite the Fed’s big announcement, stocks were back down again as investors continued to dump shares of tech companies, which have been especially hard-hit amid the wider market selloff so far this year.
Several e-commerce companies saw shares fall after disappointing first-quarter earnings on Thursday, weighing on market sentiment: Ebay lost nearly 12%, Etsy 17% and Shopify 15%.
Shares of Big Tech companies were also moving sharply lower, with Amazon and Facebook parent Meta falling 7% or more, while Microsoft lost around 4%.
Government bond yields were on the rise amid the heightened uncertainty, with the ten-year Treasury note once again trading above 3%—its highest level since 2018.
Stocks had surged higher on Wednesday following the Federal Reserve’s rate hike: The Dow Jones Industrial Average rose 2.8%, over 900 points, while the S&P 500 gained 3% and the tech-heavy Nasdaq Composite 3.2%. Recent market moves have been extremely choppy, with equities still recovering from a brutal selloff in April. The Dow and S&P 500 both recorded their worst months since March 2020, down 4.9% and 8.8%, respectively, while the Nasdaq posted its worst month since 2008, falling over 13%. Many analysts have warned of rising recession risks, as the Federal Reserve will likely have a tough time aggressively raising interest rates without hurting economic growth.
“There’s a real battle going on between dip buyers and those that believe there is more downside to come,” says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. He believes that markets are in a “difficult period” and that there is “still more downside ahead later this year,” though bear market rallies can be “sharp and vicious (for those left behind).”
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The latest move from the central bank on Wednesday “confirms the base case scenario that the markets incorrectly priced in huge aggressive Fed action this year,” says Jeffrey Roach, chief economist for LPL Financial. Though the Fed said it is “prepared to adjust policy” as needed, “inflation risks linger from the Russian invasion and China’s extreme Covid lockdowns,” Roach adds.