Wall St. plunges as Powell flags sharper rate hikes

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STORY: POWELL: “The process of getting inflation back down to 2% has a long way to go, and is likely to be bumpy…”

U.S. Federal Reserve Chair Jerome Powell sent investors fleeing stocks on Tuesday after he told Congress the central bank will likely need to hike interest rates higher than expected in order to combat rising prices.

The Dow closed down 1.7%, the S&P 500 dropped 1.5% and the Nasdaq shed one-and-a-quarter percent.

Powell’s remarks, before the Senate Banking Committee, were his first since data for January showed an unexpected jump in inflation and an unusually large increase in jobs – and still, he was more hawkish than Wall Street was expecting, says Sam Stovall, Chief Investment Strategist at CFRA Research.

“I think that the markets were surprised by Fed Chair Powell's comments, especially since he implied that the next meeting could bring a 50 basis point increase rather than the series of 25 basis point hikes that the market had factored into expectations. [FLASH] I think the terminal rate remains the $64,000 question. Our belief right now is that it'll end up being between five and a quarter (5.25) and five and a half (5.5) percent. Now, though, the possibility is that it would be at about five and a half (5.5) to five and three-quarters (5.75) percent. And then still you have some that believe it could go up to 6%.”

Powell, who will testify again on Wednesday before the House of Representatives Financial Services Committee, also added that the Fed would not consider changing its 2% inflation target.

Big stock moves for the day included a sharp decline for Rivian Automotive after the electric automaker unveiled plans to sell bonds worth $1.3 billion.

And Dick's Sporting Goods rallied after the retailer forecast annual earnings above Wall Street estimates and more than doubled its quarterly dividend.