Wall Street's main index fell sharply on Thursday in a broad-based selloff as the Federal Reserve's less hawkish tone failed to ease investors' expectations of bigger interest rate hikes this year to tame surging inflation.
The Nasdaq dropped 5% and the S&P 500 looked set to erase all of its gains from the previous session after Google-parent Alphabet Inc, Apple Inc, Microsoft Corp, Meta Platforms, Tesla Inc and Amazon.com fell between 4.8% and 7.3%.
The US central bank on Wednesday raised interest rates by half a percentage point as expected but Fed Chair Jerome Powell explicitly ruled out a hike of 75 basis points in a coming meeting.
Traders, however, on Thursday raised their bets on a 75 basis point hike at the Fed's June meeting.
"There are more people that doubt the Fed can stave off inflation without destroying our economy," said Jake Dollarhide, chief executive officer at Longbow Asset Management in Tulsa, Oklahoma.
"It's very much a public situation where everyone is seeing the pain of the Fed taking away the punchbowl play out on a daily basis."
Worries about Fed policy moves, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, overshadowing a better-than-expected quarterly reporting season.
At 12:08 p.m. ET, the Dow Jones Industrial Average was down 1,056.76 points, or 3.10%, at 33,004.30, the S&P 500 was down 157.38 points, or 3.66%, at 4,142.79, and the Nasdaq Composite was down 634.50 points, or 4.89%, at 12,330.35.
Only 13 constituents of the S&P 500 index were in the green by 12 p.m. ET, while the Nasdaq was on track for its biggest one-day percentage fall since September 2020.
All of the 11 major S&P sectors declined, with consumer discretionary and technology being the worst hit and slumping 5.5% and 4.8%, respectively.
The CBOE Volatility index, also known as Wall Street's fear gauge, climbed to 31.73 points.
The focus now shifts to the US Labor Department's closely watched monthly employment report on Friday for clues on labor market strength and its impact on monetary policy.
Declining issues outnumbered advancers for a 9.34-to-1 ratio on the NYSE and for a 6.18-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 40 new lows, while the Nasdaq recorded 20 new highs and 267 new lows.