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U. S. stocks plunged Tuesday after Federal Reserve Chairman Powell spoke, and U. S. bond yields rose.

The s & p 500 fell 0.7%, a day after the benchmark index rose. The Dow Jones industrial average fell 0.5% and the NASDAQ fell 0.8%.

Powell appeared before the Senate Committee on Banking, Housing and Urban Affairs (Senate Committee on Banking, Housing and Urban Affairs) at 10:00 et. He warned that Fed officials would raise interest rates more than they had expected to fight high inflation.

Last month, the fed raised its benchmark federal funds rate by 0.25 percentage point to between 4.5% and 4.75%. The Fed slowed the pace of rate hikes after raising interest rates by 50 basis points in December and 0.75 basis points in November.

Some investors say the Fed is likely to accelerate interest rate hikes again at its March 21-22 meeting in response to data showing persistent inflation and a strong labour market. Interest rate futures traders think there is a 1/4 chance that the Fed will raise interest rates by 50 basis points and another 25 basis points by 3/4, according to CME Group Inc Group (CME Group).

Joseph Little, chief strategist at HSBC Asset Management, expects Mr Powell to justify the rate hike without seeking to encourage the market to expect a bigger rate rise than is currently expected. He thinks the fed will raise interest rates to around 5.5% by the middle of the year and then cut them at the end of 2023 as the economy slips into recession.

The yield on the two-year Treasury note jumped on Tuesday as investors reviewed comments from Federal Reserve Chairman Powell Powell that the Fed may need to accelerate the pace of rate hikes again.

The two-year Treasury note rose 8 basis points to 4.979 per cent, the highest level since 2007. Meanwhile, the yield on the benchmark 10-year Treasury note rose 3bp to 3.987%.

"the latest economic data are stronger than expected, suggesting that the final level of interest rates may be higher than previously expected," Powell said in a speech. Powell added: "if all the data show that accelerated tightening is necessary, we will be prepared to accelerate the pace of interest rate hikes."

The Fed has been implementing policy measures over the past year, including eight consecutive interest rate increases since March 2022 in an effort to cool the economy and ease inflation.

Investor concerns about the pace of interest rate hikes dragging the US economy into recession have spread among investors and prompted many to hope that the Fed will suspend rate hikes this year.

In recent weeks, Fed officials have hinted that interest rates may continue to rise and stay high for a longer time. At the same time, the latest round of inflation data shows that the pressure of rising prices continues.

Both wholesale and consumer inflation data rose in January, higher than monthly expectations, and the price index of personal consumption expenditure in January was also higher than expected. The latter is one of the Fed's preferred indicators of inflation. A series of new job market data will be released this week, including Friday's February jobs report.

Edit / jayden