Why The Stock Market Dropped Following Fed Minutes

On Wednesday, officials released details of December's Federal Open Market Committee meeting. According to the minutes, Fed Chairman Jerome Powell and other officials anticipate the vehicles fueling high inflation lasting potentially beyond 2022.

This means the Fed could raise interest rates sooner than they had initially thought. The decision makers are in a sticky situation: how quickly can they raise rates to curb inflation, without wreaking havoc on the economy?

The minutes came out at 2 p.m. ET. Following the details, all major indices dropped. Particularly, the Nasdaq composite traded lower by nearly 2% in the last two hours of trading.

See Also: Why A Federal Reserve Interest Rate Hike Could Be Closer Than You Think

Price Action: Tech and growth stocks tend to get hit harder in high-interest-rate environments. The Invesco QQQ Trust Series 1 QQQ, which tracks the performance of the NASDAQ 100 index, finished down 3.07%.

The SPDR S&P 500 ETF Trust SPY finished down 1.92%, while the SPDR Dow Jones Industrial Average ETF Trust DIA finished down 1.03%, showing there was more weakness in tech (QQQ) than other sectors of the market.

If interest rate fears continue to spook investors, growth and tech could continue to see a broad sell-off. Conversely, if interest rate fears ease, growth stocks tend to bounce back quicker than other stocks.