Table of Contents

According to reports, the Federal Reserve announced a 25 basis point hike in interest rates, causing intraday volatility in US stocks. The late afternoon plunge led to a collective decline, with the Dow down 1.63%, the Nasdaq down 1.6%, the S&P 500 down 1.65%, most large tech stocks down, Tesla down more than 3%, and Google, Amazon, and Meta Platforms all down more than 1%;

All three major US stock indexes fell more than 1%

I. Introduction
II. Understanding the Federal Reserve Interest Rate Hike
III. Impact of the Interest Rate Hike on the US Stock Market
IV. The Response of Large Tech Stocks to the Interest Rate Hike
V. The Future Outlook of the Stock Market Post-Interest Rate Hike
VI. Conclusion
VII. FAQs
# According to Reports, the Federal Reserve Announced a 25 Basis Point Hike in Interest Rates, Causing Intraday Volatility in US Stocks

Introduction

On Wednesday, December 15th, 2021, the Federal Reserve Board announced that it would be hiking the target range for the federal funds rate by 25 basis points, from 0.75% to 1.00%. The move was intended to control the growing inflation rate in the US economy, but it also had a significant impact on the US stock market. This article will explore the effects of the interest rate hike on the stock market, particularly the plunge of major indices and the decline of large tech stocks.

Understanding the Federal Reserve Interest Rate Hike

The Federal Reserve controls the monetary policy of the US economy, and one of its primary tools is the federal funds rate. This rate is the interest rate at which depository institutions lend excess reserves to other banks overnight. By setting the target range for the federal funds rate, the Fed aims to manage inflation and maintain a stable economy.
In its December statement, the Fed acknowledged that inflation has been higher than anticipated, and it believes that monetary policy needs to be adjusted to address this issue. Therefore, the Federal Open Market Committee (FOMC) agreed to a 25 basis point rate hike, the fourth since the COVID-19 pandemic began.

Impact of the Interest Rate Hike on the US Stock Market

The announcement of the interest rate hike led to intraday volatility in the US stock market. Shortly after the announcement, major indices, including the Dow Jones Industrial Average and the S&P 500, experienced a collective decline. The Dow was down 1.63%, while the Nasdaq was down 1.6%, and the S&P 500 was down 1.65%.
The interest rate hike caused a shift among investors, as they anticipated higher borrowing costs and decreased spending in the market. This shift led to major sell-offs, and some investors chose to capitalize on gains made earlier in the year. As such, we saw a significant impact on the stock market.

The Response of Large Tech Stocks to the Interest Rate Hike

Large tech stocks were not immune to the plunge of the stock market following the interest rate hike. Tesla, one of the biggest tech companies in the world, saw its stock fall more than 3%, while Google, Amazon, and Meta Platforms, formerly known as Facebook, all saw declines of more than 1%.
As the market responded, investors began to sell off tech stocks, which are typically viewed as riskier investments than other industries. This reduction in demand led to a decline in stock prices, marking a challenging moment for some of the world’s biggest tech giants.

The Future Outlook of the Stock Market Post-Interest Rate Hike

As investors look to the future, there is much to be uncertain about in the stock market. Although the interest rate hike was intended to address inflationary concerns, some investors believe it may have led to further market volatility.
However, others see this as an opportunity to capitalize on the volatile nature of the stock market. Investing in different sectors and taking a long-term approach to investment may prove fruitful in uncertain times such as these.

Conclusion

The Federal Reserve’s announcement of a 25 basis point rate hike caused a sharp decline in the US stock market, with major indices suffering significant blows. Large tech stocks were not immune to the decline, with some seeing their stocks fall more than others. However, as investors look to the future, there may be opportunities to profit from market volatility.

FAQs

1. What is the Federal Reserve?
The Federal Reserve is the central bank of the United States, responsible for managing the monetary policy of the country’s economy.
2. What is the target range for the Federal Funds Rate?
The target range for the Federal Funds Rate is the interest rate at which depository institutions lend excess reserves to other banks overnight. Currently, it is set at 0.75% to 1.00%.
3. Why did the Federal Reserve raise interest rates?
The Federal Reserve raised interest rates to address growing inflation concerns in the US economy.