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Stocks experienced a vicious sell-off Friday, prompted by Fed Chairman Jerome Powell’s undeniably hawkish comments about the likely need for aggressive interest rate hikes to lower inflation.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said during a speech in Jackson Hole, Wyoming. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
Markets initially took his brief remarks in stride but losses accelerated as the day went on.
The Dow Jones Industrial Average closed down 1,008 points, or 3%. The S&P 500 closed down by 141 points or 3.37%. The index is on track for its biggest monthly loss in two months. While the tech-heavy Nasdaq Composite saw the steepest decline of 498 points or 3.9%.
“He basically said there will be pain and that they won’t stop and can’t stop hiking until inflation moves a lot lower,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “It was a mercifully short speech and to the point. Powell didn’t really break new ground, which is good since Jackson Hole isn’t a policy meeting.”
Expectations built through the week that Powell would try to bat down recent talk about a “pivot” by the Fed.
