Stocks finished sharply lower Thursday, giving back all of the previous sessions' post Fed decision gains and pulling the Dow below the 30,000 point mark for the first time since early last year, as investors re-set prices on risk assets around the world in anticipation of faster near-term rate hikes and relentlessly high inflation.
The Dow Jones Industrial Average finished down 739 points, or 2.41% to 29,929, while the S&P 500 retreated 3.24%. The Nasdaq fell 4.08%.
The Federal Reserve delivered its biggest rate hike since 1994 on June 15, boosting its Fed Funds rate by 75 basis points to a range of between 1.25% and 1.5%.
Fed Chair Jerome Powell said similarly-sized rate hikes won't be 'common', but he nonetheless indicated another could follow in July, with smaller hikes into the autumn, as the central bank raised its forecasts for annual inflation and slashed its GDP growth rate forecast
Powell's indication that a bigger, perhaps even 100 basis point rate hike is off the table gave stocks an initial boost, but the expectation of slower growth, faster inflation and rising unemployment gave way to concerns over a near-term recession, particularly after the Atlanta Fed's GDPNow forecasting tool indicates U.S. growth has already stalled even as inflation surges to the fastest pace in forty years.
"We're not trying to induce a recession, let's be clear about that," Powell told reporters in Washington. "Our goal is to get 2% inflation while keeping the labor market strong. This is a strong labor market. The pathways ahead have become much more challenging."
Nevertheless, rate traders are pricing in an 81.4% chance of a 75 basis point rate hike in July, as well as a 27.7% chance of a similar-sized move in September, according to the CME Group's FedWatch.
The Fed's hike, its third under Powell, was followed by a surprise move by the Swiss National Bank -- a major holder of U.S. stocks, including Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) -- which lifted its key lending rate for the first time in 15 years Thursday as the alpine economy attempts to fend off inflationary pressures from its Eurozone neighbors.
The Bank of England also boosted rates today, taking its benchmark Bank Rate 25 basis points higher to 1.25%, as inflation in the Brexit hit economy looks to surpass 10% in the coming months,
Given the current macroeconomic challenges, it is imperative that investors monitor how different markets and assets are faring, rethinking their strategies accordingly," said Jatin Ondhia of London-based Shojin Property. "Diversification and agility could prove key in navigating this testing climate, and it should be expected that most resilient markets - such as real estate - will continue to attract investor demand."
The collective central bank tightening kept stocks in the red overnight, with Asia's MSCI ex-Japan index falling 1% and Europe's region-wide Stoxx 600 down 2.25% in late afternoon trading in Frankfurt.
In the U.S., benchmark 10-year Treasury bond yields slumped to 3.244% as traders ploughed into fixed income assets as a hedge against slowing growth, with 2-year notes at 3.12%.
The dollar index fell 1.3% against a basket of six global currencies to 103.78 in late New York trading, following weaker-than-expected housing starts data for the month of May.
May housing starts fell 14.4% to an annual rate of 1.549 million, well shy of the Street consensus forecast of 1.701 million. Permits for new construction were also down 7% to a pace of 1.695 million.
Tesla (TSLA) shares moved 8.54% lower after the carmaker unveiled across-the-board price hikes for its U.S. models, indicating input cost pressures that could pressure near-term profit margins.
Shares were also likely pressured by indication the CEO Elon Musk will reiterate his desire to close the $44 billion take-private deal for Twitter (TWTR) when he meets with staff at the microblogging website later today in San Francisco.
Revlon (REV) shares slumped nearly 11% after the cosmetics company filed for Chapter 11 bankruptcy protection of its U.S. business.
Saddled with around $3.3 billon debt and suffering from supply chain snarls and increasing competition from nimbler rivals, Revlon listed liabilities of between $1 billion and $10 billion in its Chapter 11 filing with the Bankruptcy Court for the Southern District of New York.
McDonald's (MCD), meanwhile, fell 1.5% after the world's biggest restaurant chain agreed to settle a $1.3 billion tax dispute with authorities in France.
Kroger (KR) fell 2% despite it posting stronger-than-expected first quarter earnings, and boosted its full-year profit forecast, as customers shifted focus to food and staples purchases amid the fastest domestic inflation in more than four decades.
