US stocks fell on Thursday as Wall Street was rattled by another significant rate hike by Federal Reserve officials and weighed on similar moves by monetary policymakers across the Atlantic. The disappointing reading on consumer spending also raised concerns about the health of the US economy.

The European Central Bank and the Bank of England followed the US Fed by raising interest rates by 50 basis points on Thursday morning. The BoE’s hike pushed interest rates to their highest level since 2008. Indications from each of the banks that further tightening was underway dampened optimism at the peak of inflation.

The S&P 500 (^GSPC) fell 2.5%, while the Dow Jones Industrial Average (^DJI) fell more than 750 points, or 2.3%, for its worst day in three months. The Nasdaq Composite ( ^IXIC ) fell 3.2%.

US Treasury yields fell, with the benchmark 10-year falling below 3.5%. The US dollar index rose while oil prices fell, with West Texas Intermediate (WTI) crude futures trading around $76 a barrel.

European Central Bank President Christine Lagarde echoed Fed Chair Jerome Powell’s dovish tune following the monetary authority’s rate decision.

“Anyone who thinks this is a pivot for the ECB is wrong,” Lagarde said at a press conference. “We should expect interest rates to rise by 50 basis points for some time.”

“We’ve got more ground to cover, we’ve got a long way to go and we’re in the long game,” he said.

Meanwhile, the US government’s retail sales report showed spending fell sharply in November as the main holiday shopping season kicked off. The latest figure for retail sales showed a 0.6% drop from the previous month, but a 6.5% increase from the same period last year.

“Black Friday and holiday shopping weren’t enough to save retail sales last month, as they fell the most this year and were well below expectations,” said Mike Lowengart, head of Model Portfolio Construction at Morgan Stanley.

“The consumer has been resilient in the face of high inflation and rising rates, but higher prices and talk of a recession could make their wallets second-guess,” he added. “It’s been a busy week for investors, with both the Fed and ECB raising interest rates, so it shouldn’t be a surprise to see a shaky market.”

While the slowdown in retail spending showed signs of economic weakness, another economic release early Thursday highlighted the continued tightness of the labor market. Last week, jobless claims unexpectedly fell to their lowest level since September. Initial jobless claims, the most timely snapshot of the U.S. employment situation, came in at 211,000 for the week ended Dec. 10, down 11,000 from the previous week’s revised level, according to Labor Department data.

On the corporate front, Tesla ( TSLA ) shares steadied on Thursday after falling all week, even as a regulatory filing showed CEO Elon Musk sold roughly 21,995,000 shares of the company, or about 3,000 shares, in the three-day period ending Dec. 14. 6 billion dollars. Tesla shares are down about 20% in December and about 55% year-to-date after the electric car giant’s sales accelerated in recent days.

Shares of Lennar ( LEN ) also rallied after earlier losses following earnings from the homebuilder late Wednesday, which showed an 11% rise in fourth-quarter profit. Lennar closed up 3.8%.

Thursday morning’s moves follow a decline in key averages from the previous trading session after the Fed raised its benchmark interest rate by 50 basis points. Powell also emphasized that he and his colleagues will continue to raise rates in 2023 until a higher revision to the projected terminal rate of 5.1%.

Wednesday’s half-percentage-point hike, which took the Fed funds rate to a range of 4.25%-4.5%, saw a 75 basis point slowdown in each of the Fed’s last four policy meetings, the most aggressive stretch. campaigns since the 1980s.

Despite the slowdown in the rate and magnitude of growth, Powell continued to insist that the work he and his colleagues were doing to combat persistently high inflation was far from over.

Federal Reserve Board Chairman Jerome Powell holds a press conference following the announcement that the Federal Reserve raised interest rates by half a percentage point at the Federal Reserve Building in Washington, U.S., December 14, 2022. REUTERS/Evelyn Hochstein

“Now that we’ve raised rates by 425 basis points this year and we’re in capping territory, it’s not so much about how fast we go, it’s much more important to think about what the bottom line is.” Powell said at a press conference with reporters on Wednesday. “At some point, the question will arise: how long will we remain restrictive?”

The Fed’s “dot plot,” which shows policymakers’ estimates of interest rates, showed expectations that the federal funds rate would rise to a range of 5.1% and 5.4% in 2023, before still averaging 4.1% in 2024. on from previously estimated. 3.9% – the change strategists say is the biggest surprise revision to the central bank’s outlook.

“These estimates are significantly more dovish than their previous forecasts and have not been tracked in advance, as is usually the case with the Fed,” said William Blair macro analyst Richard de Chazal.

Alexandra Semenova is a Yahoo Finance reporter. Follow him on Twitter @alexandraandnyc

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