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Dow drops 1,000 points with stock market in free fall

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Stocks are plummeting on Wall Street, erasing a rally from a day earlier, as markets assess the fallout from the Federal Reserve’s stepped-up fight against inflation.

The Dow fell more than 1,000 points, or 3%, as of noon EST, while the S&P 500 fell 3.7%. The tech-heavy Nasdaq plunged 4.8%.

Markets rallied a day earlier after the Federal Reserve on Wednesday said it wouldn’t move as quickly as some had feared to hike interest rates. But traders are starting to fret more about the impact of the Fed’s moves to dampen demand for borrowing money as it tries to cool surging inflation.

Bond yields resumed their upward march, which will send mortgage rates higher. The yield on the 10-year Treasury rose sharply, to 3.1%, reaching its highest levels since late 2018.

Technology companies had some of the biggest losses and weighed down the broader market, in a reversal from the solid gains they made a day earlier. Apple fell 3.4% and Microsoft fell 3.9%.

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Internet retail giant Amazon slumped 6.4% and Google’s parent company Alphabet fell 4.3%.

Energy stocks held up better than the rest of the market as U.S. crude oil prices rose 1.4%. Energy markets remain volatile as the conflict in Ukraine continues and demand remains high amid tight supplies of oil. European governments are trying to replace energy supplies from Russia and are considering an embargo. OPEC and allied oil-producing countries decided Thursday to gradually increase the flows of crude they send to the world.

However, higher oil and gas prices have contributed to the uncertainties weighing on investors as they try to assess how inflation will affect businesses, consumer activity and overall economic growth.

The Fed’s aggressive shift to raise interest rates has investors worrying about whether it can pull off a tricky balancing act — slowing the economy enough to halt high inflation but not so much as to cause a downturn.

The Fed’s latest move to raise interest rates by a half-percentage point had been widely expected. Markets steadied this week ahead of the policy update, but Wall Street was concerned the Fed might elect to raise rates by three-quarters of a percentage point in the months ahead. Fed Chair Jerome Powell eased those concerns, saying the central bank is “not actively considering” such an increase.

The central bank also announced it will start reducing its huge $9 trillion balance sheet, which consists mainly of Treasury and mortgage bonds, starting June 1.

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The Bank of England Thursday raised its benchmark interest rate to the highest level in 13 years, its fourth rate hike since December as U.K. inflation runs at 30-year highs.

The latest corporate earnings reports are also being closely watched by investors trying to get a better picture of inflation’s impact on the economy. Cereal maker Kellogg rose 4.1% and energy company ConocoPhillips rose 1.7% after reporting encouraging financial results. Etsy stumbled 15.5% after giving a weak forecast.

Twitter rose 3.6% after Tesla CEO Elon Musk said he had secured more backing for his bid to take over the company.