Rate Fears On Wall Street Sank S&P 500 and Nasdaq 4%

Barry Adams
13 Jun, 2022
New York City

On Wall Street fear ruled and investors sold stocks deepening market selloff. 

Market indexes plunged after investors increasingly focused on the yawning gap between the current interest rates at 1% and inflation nearing 9%. 

The gap between the interest rate and inflation is so wide that investors fear only drastic Fed actions will tame inflation running above the Fed's target range of 2% and showing no signs of cooling.

The Fed's plan to lift rates is a blunt instrument with wider ramifications for the economy and may lead to unintended consequences. 

Tougher Fed actions, higher rates faster, will not only slow down the economy but also lift jobless rates and reduce the value of future profits. 

The stock markets around the world turned lower on the prospects of elevated inflation for many more months and larger rate hikes in the U.S. and Europe. 

In addition, crude oil prices are showing no signs of softening despite trading near 8-year highs despite the prospects of slowing economies. 

This week, central banks around the world are going to announce their rate decisions. 

The rate decisions are expected from the U..S. Federal Reserve and the Banco Central Do Brasil on Wednesday, from the Bank of England on Thursday, and from the Bank of Japan and Swiss National Bank on Friday. 

The S&P 500 closed down 3.9% to 3,749.62 and the Nasdaq Composite index plunged 4.7% to 10,809.23. 

Only five stocks closed higher in the S&P 500 index. 

In the year so far, the S&P 500 extended losses to 21.8% and the Nasdaq Composite fell deeper in the bear market with a loss of 31.7%. 

Bitcoin dropped 15% and extended two-month losses above 50%. 

Travel and leisure stocks led the losers. 

American Express plunged 5.2%, American Airlines declined 9.5%, Delta Air dropped 8.3%, Hyatt Hotels plunged 7.01%, and Expedia Group decreased 7.7%. 

Large losses in trading today did not spare large tech companies. 

Microsoft Corp declined 4.2%, Apple Inc lost 3.8%, Alphabet plunged 4.1%, and Meta Platforms decreased 6.5%. 

European markets closed at their lows of the day tracking losses on Wall Street. 

The DAX index dropped 2.4% to 13,427.03, the CAC-40 index declined 2.7% to 6,022.32, and the FTSE100 index fell 1.5% to 7,205.81. 

Futures of crude oil declined 41 cents to $120.22 and natural gas fell 18 cents to $8.67 a unit. 

The yield on 10-year Treasury notes rose 24 basis points to 3.389%, highest since 2011.

Asian market plunged after the U.S. inflation accelerated and fueling worries of faster rate hikes. 

The yen dropped to a 23-year low on widening rate gap between Japan and the U.S. 

Indexes in China declined after Beijing reimposed stricter controls in several parts of the city.

The Nikkei index plunged 3.01% to 26,987.44, the Hang Seng index declined 3.4% to 21,067.58, and the Kospi index dropped 3.5% to 2,504.51, a 19-month low.

Market indexes in Frankfurt and Paris dropped 2% and in London declined 1.7%.  

The Sensex index dropped 1,456.74 or 2.7% to 52,846.70 and the Nifty 50 index plunged 2.6% or 427.40 to 15,774.40.

The Australian markets were closed for a holiday and the New Zealand index dropped 1.9%, the largest one-day decline in four months and fell to its lowest level in two years.

The Japanese government 10-year bonds yield rose to 0.255%, a six-year high and above the cap set by the central bank, ahead of the interest rate decision by the Bank of Japan on Friday.