WALL Street stocks sank today, reversing the prior session’s gains as markets reassessed the Federal Reserve’s moves to tighten monetary policy in response to inflation. 

Near 1500 GMT, the Dow Jones Industrial Average was down 2.7% at 33,157.59. 

The broad-based S&P 500 fell 3.1% to 4,166.29, while the tech-rich Nasdaq Composite Index tumbled 4.3% to 12,409.31. 

The central bank’s policy meeting had concluded yesterday with a half-point rate increase as expected, but no sign that the Fed was willing to make a three-quarter point increase in the future, a reassuring sign to markets nervous about high borrowing costs. 

Major indices finished that day’s trading up around 3% in a relief rally after Fed chair Jerome Powell expressed confidence the United States central bank could engineer a “soft landing” that tames inflation without sending the economy into a recession. 

But markets are reevaluating the situation today. 

Patrick O’Hare of Briefing.com said the prior session’s rally was fueled by “a counter-intuitive catalyst” and noted that high interest rates are traditionally not positive for equities. 

“When the Fed is aiming to slow demand with rising interest rates, in an effort to squash inflation, it stands to reason that earnings growth is going to slow as well,” he wrote in an analysis. 

“Market participants should be careful about what they wish for and rally around – or at least be more discerning as they do because the Fed is still just getting started.” – AFP, May 5, 2022.