NEW YORK, Dec. 3 (UPI) — The Dow Jones Industrial Average tumbled more than 300 points in trading Thursday amid concerns that the Federal Reserve may raise interest rates in two weeks before the U.S. economy is ready to withstand it.
The Dow settled at 17,477, down 252 points, at the close of trading Thursday. The Nasdaq dropped 85 points and the S&P 500 fell 30 points. At one point, the Dow was down 304 points.
A major concern for investors Thursday was that the Federal Reserve may raise the federal funds rate by a quarter point at its Dec. 15 meeting — a hike Fed chair Janet Yellen effectively promised this week.
Wednesday, Yellen told an economic group in Washington that the rate increase would be a reflection of “how far our economy has come in recovering from the effects of the financial crisis and the Great Recession.”
Yellen also downplayed the worry that a November jobs report might impact the Fed’s decision — and that raising the rate, which has been near zero since the financial crisis hit in 2008, would send the country into another recession in 2016.
A Department of Labor report Thursday showed that first-time unemployment claims rose by 9,000 last week but remain relatively low. Labor officials said more than 270,000 new jobs were added to the domestic economy in October. The numbers for November will be released by the department Friday.
Investors are also concerned that the U.S. central bank is moving in a different direction than the European Central Bank, which announced a spate of new stimulus measures Thursday.
“I think the market’s a little bit more focused on the Fed moving on rates and the pace going forward,” analyst Robert Pavlik said. “Additional rate hikes may be coming and the economy really isn’t that strong but for some reason the Fed thinks it is, all because of the jobs number.”
Yellen has said multiple factors — such as rising inflation and declining unemployment — indicate that the U.S. economy is strong enough to withstand a rate hike. Some analysts, though, worry that a rate increase now might jump the gun and stifle the progress that has been made so far.
Others have argued that the Fed’s long-awaited hike will probably be anticlimactic because markets are already speculative and forward-looking in nature — meaning that any impact from a rate increase may have already taken hold.
“Whatever the results of a rate rise are going to be have pretty much already happened,” Forbes analyst Tim Worstall wrote Thursday. “Just about everybody does think [a rate hike is] going to happen. So, that’s already in market prices.”
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