S&P, Dow, Nasdaq fall as Fed's more hawkish tone, weak retail sales fuel recession fears
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Wall Street's major indices tumbled on Thursday amid growing concerns that the Federal Reserve turning more hawkish could push the economy into a recession. These concerns were compounded by weak retail sales data.
The Nasdaq Composite (COMP.IND) dropped 3.4%, S&P 500 (SP500) declined 2.8% and Dow (DJI) slid 2.6%. All three indices fell to their lowest levels in more than a month.
All 11 S&P sectors were trading in the red, led by Communication Services stocks. Netflix (NFLX) was a standout decliner, as the streaming giant is reportedly allowing refunds to advertisers after missing some viewership guarantees. 
Investors appear to be less confident that Fed Chair Jerome Powell is ready to continue downshifting the pace of rate hikes at upcoming meets, as the FOMC was more hawkish than expected.
"Chair Powell â either you believe your policy stance is 'not sufficiently restrictive' or you believe it is close enough that a 25-bp hike is on the table for February. You can't believe both," Steven Blitz, strategist at T.S. Lombard, wrote. 
Investors were troubled by Fed's rate projections, which showed the median FOMC rate projection for 2023 increasing to 5.1% from 4.6%.
"The future looks none too bright, with the Fed indicating rates rising to 5.1%. Inflation may be down slightly but the cost of money is outdistancing the fall, and the Fed seems to be paying no attention to what is actually happening," said SA contributor Mark Grant. 
Meanwhile, the Bank of England boosted its benchmark rate by an expected half percentage point to 3.5% while the European Central Bank hiked rates by 50 bps to 2.50%.
Retail sales for November fell more than expected, sending retail stocks lower amid growing concerns that 2023 will bring in a recession.
"November retail sales were very disappointing. This year's Black Friday sales clearly did not live up to expectations and to normal seasonal patterns," said Jefferies economist Aneta Markowska, trimming Q4 GDP estimate from 1.5% to 1.1%.
Rates were lower, with the 10-year Treasury yield (US10Y) down 6 bps at 3.44% and the 2-year yield (US2Y) flat at 4.24%.
"Markets need to re-think the sustainability of the bond rally seen in the past month," ING said. "Nominal and real rates are seen up. But not by very much. With no sense as of yet that the Fed is done, we continue to call for market rates to move higher from here."
On the economic calendar front, the Philly Fed Outlook was -13.8 in December, marking its sixth negative reading in the past seven months, while Empire State manufacturing and weekly jobless claims declined more than expected.