The New York Stock Exchange faced significant losses on Thursday, as Federal Reserve Chairman Jerome Powell hinted at potential rate hikes, and Tesla (NASDAQ:TSLA)'s disappointing quarterly figures were revealed. The Dow Jones, S&P-500, and Nasdaq Composite indices all saw drops of 0.75%, 0.85%, and 0.96% respectively.
In a speech at the Economic Club of New York, Powell suggested that the robust US economy and persistent labor market tensions might necessitate more interest rate hikes. This assertion amplified existing fears about long-term high rates, pushing the 10-year US Treasury yield to its highest point in 16 years. Market apprehension is mounting regarding the impact on companies with high valuations based on future earnings rather than current profitability.
Tesla's shares fell by 9.3% amid the quarterly corporate results season due to underwhelming gross margin, profit, and turnover figures. CEO Elon Musk voiced concerns about how rising interest rates could negatively affect car sales.
Despite the overall downturn, some companies experienced growth. Netflix (NASDAQ:NFLX)'s shares surged by 16.06% following their announcement of nine million new subscribers in Q3 and upcoming price increases in the US, UK, and France. AT&T (NYSE:T) also saw a rise in its shares by 6.56% after revising its annual free cash flow forecast upwards.
Investors are bracing for inflation and a surge in interest rates, which would lead to higher borrowing costs for corporations and consumers alike. This expected increase in borrowing costs could potentially slow down economic growth. The market's reaction to these changes underscores the widespread uncertainty about future economic conditions.
Notably, Wall Street is facing a downturn unseen since 2007 due to the looming possibility of a 5% yield on the 10-year Treasury note. Sectors such as real estate and technology, which are sensitive to interest rate fluctuations, along with influential entities like Tesla, were notably affected.
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