NEW YORK: Wall Street stocks slid Thursday on worries that the US central bank may overtighten policy, following signals from Federal Reserve officials that interest rate hikes to cool the economy are not over.
The Dow Jones Industrial Average fell 0.7 percent to 33,308.20 in early trading, while the broad-based S&P 500 shed 1.2 percent to 3,913.45.
The tech-rich Nasdaq Composite Index dropped 1.4 percent to 11,026.68.
This came as St. Louis Fed President James Bullard said on Thursday that “the policy rate is not yet in a zone that may be considered sufficiently restrictive.”
He added in a speech that the rate would need to be raised further to hit a level that is restrictive enough.
The central bank has embarked on an aggressive campaign to ease demand and bring down surging inflation, raising the benchmark lending rate six times this year.
Wall Street jumps on more evidence of cooling inflation
Kansas City Fed President Esther George also told The Wall Street Journal on Wednesday the labor market was so tight that it is unclear how policymakers can “continue to bring this level of inflation down without having some real slowing.”
She raised the possibility of a contraction in the economy as well in the interview.
“These remarks spoke directly to market participants’ growing fear: more tightening and more economic slowing, neither of which would be good for the earnings outlook,” said Patrick O’Hare of Briefing.com.
He added that worries the Fed would overtighten and “force the US economy into a hard landing” persisted on Thursday.
US economic data released on Thursday as well did not reassure investors either, with initial jobless claims “still relatively low.”
The housing sector has been decelerating as well, a trend reinforced by data showing that starts and permits declined in October.
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