US shares slide on Fed’s hawkish signals

Wall Street’s main indexes extended their stay in the red territory and recorded losses for a fourth straight session on Thursday as investors got more concerned that the US central bank could raise interest rates for longer than previously expected.

Market participants were hoping that the Fed, which raised rates by 75 basis points on Wednesday, would ease its hawkish stance in the near future after a string of big rate hikes has fanned fears of a recession.

The S&P 500 and the tech-heavy Nasdaq marked their biggest one-day percentage declines in nearly a month after Fed Chair Jerome Powell said it was “very premature” to discuss when the central bank might pause the rate hikes.

While traders are still split between the odds of a 50 bps and 75 bps rate hike in December, the peak Fed funds rate is seen climbing to 5% or higher next year, compared with a prior estimate of 4.50%-4.75% rise.

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, providing further evidence of a strong labor market. Another set of data on Thursday showed the US services industry grew at its slowest pace in nearly 2-1/2 years in October and businesses continued to face higher input prices, confirming that inflation was shifting to services from goods.

The nonfarm payrolls report due on Friday will be crucial as investors try to gauge whether the Fed’s rate hikes have significantly cooled the economy.