Merakyat.org – Stock markets faced a tumultuous day as concerns over higher interest rates and a potential government shutdown loomed large. The Dow Jones Industrial Average plummeted by 370.46 points, marking a 1.08% decline, settling at 34,070.42. Both the S&P 500 and the Nasdaq Composite followed suit, dropping 1.64% and 1.82% respectively. This marks the third consecutive day of losses for these major indexes, with the S&P 500 experiencing its worst session since March.
A significant factor contributing to the market’s unease was the surge in the U.S. 10-year Treasury yield, which hit a staggering 4.494%. This is the highest it’s been since 2007. The rise was spurred by weekly jobless claims data that indicated a robust labor market, potentially prompting the Federal Reserve to continue its rate hikes. The jobless claims for the week ending September 16 were 201,000, notably lower than the anticipated 225,000, marking the lowest volume of new unemployment claims since January.
However, the market’s woes didn’t end there. Tensions heightened following news that House Republican leaders had sent the chamber into recess, amplifying fears that a government shutdown might be imminent. Such a shutdown could potentially dent the fourth-quarter GDP.
In the backdrop of these developments, the Federal Reserve’s recent announcement added to the market’s apprehensions. While the central bank decided to maintain the current interest rates, it hinted at another rate hike before the year concludes. The bank also suggested fewer rate cuts in the upcoming year, implying a need to sustain higher rates due to persistent inflation.
Fed Chair, Jerome Powell, commented post-decision, suggesting that while a soft landing for the economy was conceivable, it wasn’t the primary expected outcome. This sentiment was echoed by Shelby McFaddin, an investment analyst at Motley Fool Wealth Management, who pointed out the challenges of navigating a prolonged high-interest rate environment.
Tech stocks, often seen as growth-oriented, bore the brunt of the market’s downturn. Major players like Tesla, Alphabet, and Nvidia all saw declines of over 2%. On the brighter side, FedEx managed to defy the prevailing trend, witnessing a 4.5% gain after reporting impressive earnings for its fiscal first quarter.