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Stock Market Plunges Amid Inflation Fears and Fed Rate Hike Speculation

Strategic Insights

— 2 min read

The stock market suffered a sharp decline yesterday as inflation fears and speculation about a possible rate hike by the Federal Reserve sent bond yields skyrocketing. The Dow Jones industrial average dropped 22.79 points, to 3,830.62, while the broader Standard & Poor's 500 index fell 3.16 points, to 463.90. The decline was driven by concerns over rising inflation, which was exacerbated by the sharp rise in gold prices. The price of gold surged $8.10, to $388.20 an ounce, in its biggest rise since September.

Key Takeaways:

  • The stock market plummeted yesterday, with the Dow Jones industrial average dropping 22.79 points to 3,830.62.
  • The broader Standard & Poor's 500 index fell 3.16 points to 463.90, while the smaller-company Nasdaq composite index dropped 3.96 points to 789.09.
  • The decline was driven by concerns over rising inflation and speculation about a possible rate hike by the Federal Reserve.
  • The price of gold surged $8.10 to $388.20 an ounce, in its biggest rise since September, indicating a rise in inflation fears.
  • The yield of the Treasury's long bond rose to 6.95 percent, the highest level since last summer.
  • The market for the 30-year bond has closed down in price for 16 of the 25 sessions since the Federal Reserve Board raised short-term interest rates a quarter-point on February 4.
  • Analysts speculated that another quarter-point rate increase by the Fed was already reflected in 30-year rates, limiting the stock market's decline.
  • Rao Chalasani, chief investment strategist for Kemper Securities Inc., said that if the Fed raises rates more than a quarter-point, then the long bond's yield might even go down and thus help stocks.
  • Sharp declines were seen in stocks like Wal-Mart Stores, Ford Motor, and Walt Disney, while other stocks like Intel and Advanced Micro Devices were also affected by news of a major court victory.

Statistics:

  • 369.4 million shares traded on the New York Stock Exchange, with a volume that was considered heavy.
  • Declining stocks outnumbered advancing stocks, 1,486 to 688.
  • The Dow Jones industrial average dropped by 22.79 points to 3,830.62.
  • The Standard & Poor's 500 index fell 3.16 points to 463.90.
  • The Nasdaq composite index dropped 3.96 points to 789.09.
  • The New York Stock Exchange composite index fell 1.56 points to 257.22.
  • The American Stock Exchange market value index declined 2.01 points to 464.78.
  • The yield of the Treasury's long bond rose to 6.95 percent, the highest level since last summer.

Sources:

  • "The New York Times"
  • "Bloomberg"
  • "Reuters"
  • "The Wall Street Journal"
  • "Kemper Securities Inc."

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