US markets see worst losses since 2020 after rate rise

US financial markets tumbled a day after the country's central bank levied the biggest interest rate rise in 22 years.

The sell-off came as worries intensified over how rising prices - and the Federal Reserve's steps to rein them in - will affect economic growth.

Technology stocks led the falls, which were some of the steepest since 2020.

The Dow index, which includes mainstays such as Apple and Nike, shed more than 1,000 points to end 3.1% lower.

The wider S&P 500 fell 3.6%, while the tech-heavy Nasdaq plummeted nearly 5%.

The losses wiped out the gains the markets had enjoyed on Wednesday, after the Federal Reserve announced it was raising its benchmark rate by half a percentage point to 0.75% to 1%.

That move, which will make borrowing more expensive, had been expected.

Analysts said investors were relieved that the bank had not moved even more aggressively, with Federal Reserve chairman Jerome Powell saying that a bigger rate hike was not under "active consideration".

But Thursday's losses suggested that worries remain about whether the Fed will be able to slow economic activity enough to cool price increases without tipping the economy into recession - defined as the economy getting smaller for two consecutive quarters.

Rising prices are also being driven by factors outside the central bank's control, such as spiking energy prices due to the war in Ukraine.

"Yesterday's [markets] explosion higher was completely comical. It was ridiculous. His comments did not justify the move that we saw," said Kenny Polcari, managing partner at Kace Capital Advisors.

While Mr Powell said he was confident the US economy was strong enough to handle the impact of higher rates, investors are concerned that the rising cost of living is starting to hit US households and will slow consumer spending.

In recent weeks, big firms such as Amazon have warned of slowing growth. Government figures this month showed the US economy contracted by 1.4% in the first three months of the year.

Shares in companies reliant on consumer spending were hit especially hard on Thursday.

On the Dow, Nike tumbled 5.9%, Apple fell 5.5% and Home Depot fell 5.1%.

EBay tumbled more than 11%, while Etsy fell almost 17% a day after both firms forecast slower growth than analysts had expected.

Social media platform Twitter bucked the overall market trend, rising 2.5% as billionaire Elon Musk lined up investors to help fund his buyout.

But shares in Mr Musk's electric car company, Tesla, tumbled more than 8%.

The sell-off deepened a downturn in US financial markets since the start of the year. The Dow is down almost 10% since January, while the S&P 500 has dropped 13% and the Nasdaq has tumbled 22%.