Dow Falls 1,000 Points After Fed Chief Speaks

The stock market cratered on Friday after the head of the Federal Reserve dashed Wall Street’s hopes that it may soon let off the brakes for the economy. The Dow fell 1,008 points, or 3%, to 32,283; the S&P 500 fell 141 points, or 3.3%, to 4,057; and the Nasdaq fell 497 points, or 3.9%, to 12,141. The plunges came after Jerome Powell said in a Wyoming speech that the Fed will likely need to keep interest rates high enough to slow the economy “for some time” in order to beat back the high inflation sweeping the country. Shorter-term Treasury yields climbed as traders built up bets for the Fed to stay aggressive with rates, per the AP.

“He basically said there will be pain and that they won’t stop and can’t stop hiking until inflation moves a lot lower,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “It was a mercifully short speech and to the point. Powell didn’t really break new ground, which is good since Jackson Hole isn't a policy meeting." Powell's speech followed up on several other Fed officials, who have recently pushed back on speculation the Fed may ease up on its interest rate hikes. The increases help corral inflation, but they also hurt the economy and investment prices.

Expectations had built through the week that Powell would try to to bat down recent talk about a "pivot" by the Fed. Such speculation had helped stocks surge through the summer. Some investors were even saying the Fed could cut interest rates later in 2023, as pressures on the economy mount and the nation's high inflation theoretically recedes. But Powell's speech made clear the Fed will accept weaker growth for a while for the sake of getting inflation under control, analysts said. (More stock market stories.)