Stocks tumbled Thursday as investors digested the Federal Reserve’s decision a day earlier to hike interest rates and increasingly worry that the country may head into an economic recession.
President Biden insisted a recession is “not inevitable,” but the Dow Jones Industrial Average dropped more than 740 points, or 2.4%, and traded below 30,000 for the first time since January 2021.
The S&P 500, which entered a bear market earlier this week, dropped 3.25% and the Nasdaq also finished down nearly 4%.
Stocks had rallied on Wednesday after the Fed raised interest rates by 75 basis points in a bid to tamp down inflation. Those gains reversed Thursday as investors grappled with the realization that central bankers might not be able to give the economy a soft landing that tames inflation while avoiding a recession.
Fed Chair Jerome H. Powell signaled another increase of 75 basis points could occur in July, depending on inflation data, so investors are bracing for an economic slowdown.
Central banks around the world are adopting aggressive measures, too.
SEE ALSO: Tech companies lay off workers, slow down hiring amid economic tumult
Speaking to The Associated Press, Mr. Biden acknowledged that Americans are “really, really down.”
“The need for mental health in America, it has skyrocketed, because people have seen everything upset,” Mr. Biden said. “Everything they’ve counted on upset. But most of it’s the consequence of what’s happened, what happened as a consequence of the COVID crisis.”
Yet he insisted the country doesn’t have to tip into a recession.
“First of all, it’s not inevitable. Secondly, we’re in a stronger position than any nation in the world to overcome this inflation,” he told the wire service.
The president cited the 3.6% unemployment rate and America’s position in the world.
“Be confident, because I am confident we’re better positioned than any country in the world to own the second quarter of the 21st century,” Mr. Biden said. “That’s not hyperbole, that’s a fact.”
For now, the markets are sour about what lies ahead in the wake of Fed action to slow consumer spending and business activity. Tech stocks slid as companies eye layoffs or slowing down hiring as they brace for a potential slowdown in demand.
The White House said it stands by the Fed’s independence and won’t second-guess its actions.
“We’re just going to give the Federal Reserve the space to do what they need to do,” press secretary Karine Jean-Pierre said.
Sen. Rob Portman of Ohio said Thursday he wished the Fed had acted much sooner.
Mr. Portman, a Republican, told CNBC’s “Squawk Box” that Mr. Biden and Democrats overstimulated the economy with the $1.9 trillion virus-relief package last year while failing to provide regulatory relief to suppliers or generate enough energy, placing the economy on the wrong track in early 2021.
“A lot of us said look, the economy is already performing well coming out of the pandemic,” Mr. Portman said. “It was obvious we were seeing a big mismatch between demand and supply, and that’s when [the Fed] should have acted.”
The senator also said oil companies need more certainty as Mr. Biden prods them to produce more gasoline to tame rising prices.
Mr. Portman said Mr. Biden pulled the rug out from under them by canceling the Keystone XL pipeline, and moved too quickly to shift to green energy at a tumultuous time in the economy, resulting in limited supply and high costs.
“It’s really rough on people, it’s the most punitive tax of all,” Mr. Portman said.
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