Wall Street tumbled to its biggest drop since December as concerns deepen about the impact of rising interest rates. The S&P 500 fell 2%, the Dow Jones Industrial Average lost 697 points and the Nasdaq composite fell 2.5%.
Rates and stock prices are high enough that strategists at Morgan Stanley say U.S. stocks look to be more expensive than at any time since 2007.
Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero at the start of last year.
The Fed said in December that its typical policy maker sees short-term rates rising to 5.1% by the end of this year with the earliest cut to rates happening in 2024. After earlier thinking the Fed would ultimately take it easier on rates than it was talking about, Wall Street has largely come into closer alignment with the Fed’s view.The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy.
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