Wall Street rout as Dow plunges 1,000 points, Nasdaq drops 5%

Wall Street lost trillions of dollars as investors soared on fears that further interest rate hikes by the US central bank would be enough to curb soaring inflation.

The belated reaction came a day after the US Federal Reserve hiked the federal funds rate by 50 basis points and Fed Chairman Jerome Powell said there were further rate increases in the future. half a percent to come over the next two months.

Traders increased their bets from a 75 basis point rise in June, even though Mr Powell has all but ruled it out.

Rising interest rates, war in Ukraine, COVID-19 lockdowns in China are all weighing on investor confidence.

The Dow Jones Industrial Average plunged 3.1%, to 32,998, the S&P 500 fell 3.5%, to 4,147, and the Nasdaq fell 5%, to 12,318, reversing the rally from yesterday.

This is the lowest level for the Nasdaq since November 2020 and the lowest for the Dow since October 2020.

The S&P’s 11 major industry sectors fell, with consumer discretionary stocks leading the falls.

The VIX volatility index climbed to 31.20 points.

Big tech companies have been sold – including Google, Apple, Microsoft and Amazon – because higher interest rates will increase their borrowing costs, and tech companies have relied on cheap financing to grow.

It saw $1.3 trillion ($1.8 trillion) wipe out the value of the world’s biggest tech companies.

Payments company Block tumbled to a loss in the first quarter as cryptocurrency bitcoin prices fell.

Block posted a net loss of $204 million, or 38 US cents per share, from a profit of $39 million a year earlier.

Twitter was one of the few stocks to rise.

Bank of England rate hike

As inflation climbs to 10% due to Russia’s invasion of Ukraine and China’s COVID-19 lockdowns, the Bank of England has raised official interest rates to a record high 13 years old.

The UK Central Bank’s Monetary Policy Committee approved a 25 basis point hike by a majority of six to three, bringing the benchmark interest rate to 1%.

Its three dissenting members wanted a 0.5% rise as inflation stood at 7% in the UK due to the higher cost of goods.

This is the fourth consecutive increase since December.

The FTSE rose 0.1% to 7,503, the DAX in Germany fell 0.5% to 13,903, while the CAC 40 in Paris fell 0.4% to 6,368.

Meanwhile, the pound plunged as the BOE warned of recession risk.

The Australian dollar was liquidated overnight.

As of 6:50 a.m. AEST, it was buying around 71.11 US cents, down 2.1%.

The Australian equity market is also expected to fall, with the ASX SPI 200 index down 1.5% to 7,217.

Oil prices jumped overnight, with Brent up 1% to US$111.19 a barrel, while spot gold fell 0.2% to US$1,876.84 the ounce.

ABC/Reuters

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