Rate Hike Fears Spark Wall Street Rout

US stocks ended Thursday sharply lower amid a broad sell-off, as investor sentiment cratered in the face of concerns that the Federal Reserve's interest rate hike the previous day would not be enough to tame surging inflation.

All three main Wall Street benchmarks erased gains made during a relief rally on Wednesday, with the Nasdaq posting its biggest one-day percentage decline since June 2020 and its lowest finish since November 2020.

The Dow's decline was its worst daily performance since October 2020.

Technology megacaps slumped. Google-parent Alphabet, Apple, Microsoft, Meta Platforms, Tesla and Amazon.com all fell between 4.3 percent and 8.3 percent.

However, it was not just high-growth stocks, which have struggled in 2022 as the prospect of rate rises had investors questioning their future earnings potential. The selloff hit all areas of the market, as traders headed for the exits.

"Investors aren't looking at fundamentals (such as earnings) right now, and this is more of a sentiment issue," said Megan Horneman, chief investment officer at Verdence Capital Advisors.

The US central bank on Wednesday raised interest rates by half a percentage point as expected and Fed Chair Jerome Powell explicitly ruled out a hike of 75 basis points in a coming meeting.

Traders, however, on Thursday raised their bets on a 75 basis-point hike at the Fed's June meeting.

Worries about Fed policy moves, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, overshadowing a better-than-expected quarterly reporting season.

The Dow Jones Industrial Average fell 3.12 percent, to 32,998, the S&P 500 lost 3.56 percent, to 4,147 and the Nasdaq Composite dropped 4.99 percent, to 12,318.

Only 19 of the S&P 500's constituents closed in positive territory, one of which was Twitter, which ended 2.6 percent higher.

Elon Musk revealed on Thursday that Oracle's co-founder Larry Ellison and Sequoia Capital were among investors that would back his takeover of the social media giant with US$7.14 billion of financing. (Reuters)