Dow drops 400 points, breaks below 30,000 on fear the Fed is overdoing its inflation fight

Stocks slumped on Friday and were on pace for another losing week as investors feared the Federal Reserve’s aggressive hiking campaign to fight inflation will lead to an economic downturn.

The Dow Jones Industrial Average fell by 408 points, or 1.36%, while the S&P 500 slid 1.7%. The Nasdaq Composite lost 2%.

Friday marked the fourth negative session in a row for the major averages, with the Dow falling below its June closing low and the 30,000 mark. The Fed on Wednesday enacted another super-sized rate hike of 75 basis points and indicated it would do another at its November meeting.

Bond yields have soared this week following the Fed’s actions, with the 2-year and 10-year Treasury rates hitting highs not seen in over a decade.

Goldman Sachs cut its year-end S&P 500 target because of rising rates, predicting at least 4% downside from here.

Stocks positioned to suffer the most in a recession have led this week’s losses with the S&P 500’s consumer discretionary sector off by 7%. Energy is down more than 8% as oil prices slump. Growth stocks including big technology names Apple, Amazon, Microsoft and Meta Platforms fell on Friday.

“Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook,” wrote Goldman Sachs’ David Kostin in a note to clients.

The major averages are on pace for their fifth decline in the last six weeks and on track to close out the week with losses. The Dow has given up about 3.5% this week, while both the S&P and Nasdaq have fallen 4.4% and 4.6%, respectively.

In other news, the pound hit a fresh more than three-decade low against the U.S. dollar after a new U.K. economic plan that included a slew of tax cuts rattled markets.