Dow selloff intensifies after Powell suggests that rates to be higher than anticipated

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Dow sheds 500 points, selloff intensifies as Powell comments on higher rates spook investors

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Stocks sold off sharply Tuesday after comments from Federal Reserve Chair Jerome Powell suggested that rates may need to go higher for longer, fueling fears of a potentially larger rate hike at the central bank’s next policy meeting.

The Dow Jones Industrial Average was last down 511 points, or 1.5%, while the S&P 500 traded about 1.3% lower. The Nasdaq Composite dropped 0.8%. As the major stock indexes fell, the 2-year Treasury yield jumped to its highest level since 2007 at nearly 5%.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in remarks to the Senate Banking, Housing and Urban Affairs Committee Tuesday morning. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

The comments indicated that the Fed may consider a larger rate hike than last month’s 25 basis point increase at its next policy meeting on March 21-22.

They also signaled a potential return to a half-point rate hike at central bank’s March meeting, depending on the strength of incoming economic data, according to Morgan Stanley.

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