NEW YORK (AP) — Already unnerved by the newest coronavirus variant, Wall Street’s losses deepened on Tuesday after the head of the Federal Reserve said it will consider shutting off its…
NEW YORK (AP) — Already unnerved by the newest coronavirus variant, Wall Street’s losses deepened on Tuesday after the head of the Federal Reserve said it will consider shutting off its support for financial markets sooner than expected. The S&P 500 was 1.8% lower in afternoon trading after Fed Chair Jerome Powell told Congress the central bank may halt the billions of dollars of bond purchases it’s making every month “perhaps a few months sooner.” It had been on pace to wrap up the purchases, meant to goose the economy by lowering rates for mortgages and other long-term loans, in June. An end to the purchases would open the door for the Fed to raise short-term interest rates from their record low of nearly zero, diluting one of the main propellants that’s sent stocks to record heights. Short-term Treasury yields almost immediately flipped from losses to gains following Powell’s remarks, as investors moved up their expectations for the Fed’s first rate hike. Losses for stocks accelerated, with the drop for the Dow Jones Industrial Average more than tripling in half an hour. It was down 656 points, or 1.9%, at 34,479, as of 1 p.m. Eastern. The Nasdaq composite was down 1.8% after earlier holding up better than the rest of the market. Higher interest rates tend to hurt stocks that are seen as expensive relative to their profits and that are banking on big profit growth far in the future. Such companies play a bigger role in the Nasdaq than other indexes.
