Stocks tumble after Fed dashes hopes for easing up on rates

Financial Markets Wall StreetNEW YORK — — Stocks are tumbling in disappointment Friday after the head of the Federal Reserve dashed Wall Street’s hopes that it may soon let off the brakes for the economy.

“He focused more on the Fed's goals rather than the path,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. “That left the market with less to grab onto in terms of the future path for policy.” He was speaking at an annual economic symposium in Jackson Hole, Wyoming, which has been the setting for market-moving Fed speeches in the past.

But Powell's speech made clear the Fed will accept weaker growth for a while for the sake of getting inflation under control, analysts said. “Powell reiterated that the Fed is worried about rising prices, and getting inflation under control is emphatically job number one,” said Jeff Klingelhofer, co-head of investments at Thornburg Investment Management.

For now, the debate on Wall Street is whether the Fed will raise short-term rates by either half a percentage point next month, double the usual margin, or by three-quarters of a point. The Fed's last two hikes have been by 0.75 points, and a slight majority of bets on Wall Street are favoring a third such increase in September, according to CME Group.

Following the reports and Powell’s comments, the two-year Treasury yield rose to 3.43% from 3.37% late Thursday. It tends to track expectations for Fed action.

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