The S&P 500 was 0.9 per cent lower in morning trading. That follows a 0.9 per cent drop from Wednesday after the Federal Reserve indicated it may cut interest rates next year by only half of what it had earlier predicted. The Fed has already hiked its main interest rate to the highest level since 2001, which helps slow inflation but at the cost of hurting investment prices.Big Tech stocks again took the brunt of the pain because they're seen as some of the biggest victims of high rates.
The two-year Treasury yield, meanwhile, was wavering following mixed reports on the economy. It slipped to 5.11 per cent from 5.17 per cent late Wednesday after climbing earlier in the morning. A separate report, meanwhile, suggested manufacturing in the mid-Atlantic region is contracting by much more than economists expected. Manufacturing, along with the housing market, have felt the sting of higher interest rates in particular and have struggled more than the broad job market.
The typical policy maker now sees the federal funds rate rising one more time this year, and then dropping by only half a percentage point from there through 2024. Three months ago, Fed officials were indicating a full percentage point of cuts could be the most likely path. High rates slow the economy and raise the pressure across the financial industry. Earlier this spring, they helped lead to three high-profile collapses of U.S. banks. They also hurt prices for all kinds of investments, but they often hit hardest on those bid up on hopes for big growth far out in the future. That's why tech stocks often swing in particular with expectations for rates.