Stock Market Today: Dow Slides Below 30,000, Tesla Falls, Amazon Drops

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The stock market was tumbling Thursday as pessimism replaced optimism following the Federal Reserve’s three-quarter point rate increase—and the possibility it could drive the economy into recession.

Shortly after the open, the

Dow Jones Industrial Average
has fallen 770 points, or 2.5%, while the

S&P 500
has dropped 2.8%, and the

Nasdaq Composite
has declined 3%. All three major indexes gained at least 1% Wednesday. The 10-year Treasury yield has risen 0.135 percentage point to 3.42%, as bond prices fall.

“The Fed is going to accept recession risk to deliver below trend [longer-term growth trend] economic growth,” wrote Dennis DeBusschere, founder of 22V Research. 

Yesterday’s rate increase wasn’t unexpected, and neither was its size. Inflation has not declined, Treasury yields have soared, and the stock market has plunged, with the S&P 500 in a bear market, defined as a 20% drop. So when the Fed delivered a rate hike in line with expectations, the market rallied. 

But this most recent rate hike isn’t the end of the story—and markets are now taking note of that. The Fed’s projected rate hikes looking ahead would bring the benchmark lending rate up to 3.75% by the end of 2023. That’s has brought the 2-year Treasury yield, which attempts to forecast the level of the benchmark lending rate a couple of years from the present, to 3.28%, up from Wednesday’s close and just under a multiyear high. 

The point is that the Fed keeps having to plan more rate hikes in order to reduce economic demand and inflation, and markets need to reflect that. The ultimate fear is that the Fed puts the economy into a recession. To be sure, Fed Chair Jerome Powell said that the Fed hopes to become data dependent soon. That means the central bank will closely monitor how quickly economic growth and inflation decline and just how much tightening is needed.

But that’s a story for another day, as far as markets are concerned. “The positive spin from Powell is gone,” wrote NatAlliance Securities’ Andrew Brenner. 

Ultimately, “They [Fed] are so far behind the curve that they have little choice” but to act aggressively in lifting interest rates, wrote Jason Brady, president and CEO of Thornburg Investment Management.

Overseas, the Bank of England raised interest rates for the fifth straight time, by 25 basis points to 1.25% on Thursday, and the Swiss National Bank surprised with a rate hike of 50 basis points, its first increase in 15 years. The Europe Stoxx 600 was down 2.2%.

Here are some stocks on the move Thursday:

Twitter

(ticker: TWTR) shares have risen 0.5% with Elon Musk expected to confirm his desire to follow through with his $44 billion acquisition of the social media company on Thursday at an all-hands meeting of employees.

Tesla

(TSLA) has fallen 4.5%. The electric-vehicle company, where Musk serves as chief executive, raised car prices. Also, analysts at Jefferies cut sales estimates for electric-vehicle makers for this year and next.

Boeing

(BA) stock was down 0.6% despite an upgrade to Buy at Citi.

Amazon.com

(AMZN) stock has fallen 3.5%. It announced that Prime Day would occur on July 12 and 13.

Sally Beauty Holdings

(SBH) stock has dropped 13% after getting downgraded to Underweight from Equal Weight at Morgan Stanley. 

Dollar General

(DG) stock was down 0.8% even after getting upgraded to Overweight from Equal Weight at Morgan Stanley.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Joe Woelfel at joseph.woelfel@barrons.com