Dow drops 400 points after Powell reiterates Fed will continue to raise rates to fight inflation

Dow drops 400 points after Powell reiterates Fed will continue to raise rates to fight inflation

Stocks fell sharply Friday after Federal Reserve Chair Jerome Powell said he will continue to raise rates to fight inflation in his Jackson Hole speech.

The Dow Jones Industrial Average dropped 407 points, or 1.22%. The S&P 500 fell 1.5% and the Nasdaq Composite slid 1.84%.

Those moves come after a hawkish speech out of the Fed chair as Wall Street sought information on the pace of future interest rate hikes.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,” Powell said.

Meanwhile, traders absorbed one of the Fed’s favorite inflation measures, the personal consumption expenditures data, which on Friday showed price increases eased in July. The University of Michigan consumer sentiment index showed a better-than-expected reading.

“It was fine. It was hawkish enough, but it wasn’t over the top,” said Wells Fargo’s Michael Schumacher. “There was expectations for a very hawkish speech so it’s hard to measure up to that.”

Communication services and information technology were the biggest laggards in the S&P 500 as investors fretted over the likelihood of higher interest rates. Meanwhile, utilities and energy were the best-performing sectors in the broader market index.

Shares of Affirm declined 17% after the consumer lending company issued weak full-year revenue guidance.

The major averages were on pace for their second straight down week. The Dow is on track for a 1.2% decline. The S&P 500 and Nasdaq Composite are heading to slightly smaller declines of roughly 0.7% each.