U.S. Dow plunges further into bear territory amid hawkish Fed fears

WASHINGTON, Sept. 29 (Xinhua) -- The U.S. Dow Jones Industrial Average took a nosedive on Thursday, plunging further into bear territory on inflation and fear of more interest rate hikes.

The sell-off occurred in all the major stock indices, with the Dow dropping 458 points and at one point hitting the lowest point this year.

The Nasdaq finished the trading day down 314 points, and the S&P 500 ended the trading day down around 78.5 points.

The moves were a continuation of the market's downward trajectory in recent weeks, as all three indices have tanked as jittery investors sold off their positions.

The past month has seen the Dow drop over 2,500 points, and it remains unknown how much the markets will continue to fall.

While markets rallied somewhat Wednesday, analysts were wary that the move was an indication of a forward trend.

"(We) remain skeptical that the calmer mood in markets on Wednesday marks an end to the recent period of elevated volatility or risk-off sentiment," UBS' Mark Haefele wrote in a Thursday note, as quoted by NBC.

"For a more sustained rally, investors will need to see convincing evidence that inflation is coming under control, allowing central banks to become less hawkish," Haefele opined.

Indeed, the worst inflation in 40 years and the Fed's aggressive actions led to all the market turmoil.

Prices are higher, and Americans are having problems making ends meet. Gas prices are also at elevated levels.

In a bid to tamp down inflation, the U.S. Federal Reserve has hiked interest rates five times since March this year, boosting the Fed's benchmark interest rate to a range of 3-3.25 percent.

But investors and economists fret that the moves could lead to an overly steep rise in unemployment by year's end - and that also has investors worried.

Desmond Lachman, senior fellow at the American Enterprise Institute, recently estimated that since the start of the year, declining equity and bond market prices have resulted in the evaporation of around 12 trillion U.S. dollars in household wealth, which would likely curb consumption.

Lachman told Xinhua that the Fed's hawkish monetary policy stance has already caused the bursting of the equity and credit market bubble, which is one reason to fear a "full-blown economic recession" in the next few months.

U.S. inflation has been caused by the current administration's profligate spending, as well as the Fed's earlier reluctance to admit to the problem and take action, economists said.