Stocks take second day of steep losses during volatile Thursday

U.S. stocks fell sharply for a second straight day Thursday as fears of higher interest rates and overpriced technology shares rattled investors.

The Dow Jones Industrial Average closed with a loss of 546 points, a 2.1 percent drop, after falling by 650 points earlier Thursday. The Nasdaq composite and S&P 500 index dropped 1.25 percent and 2 percent each as the steepest sell-off since February stretched into its second day.

Stocks briefly gained ground as trading opened Thursday, a day after the three major indexes dropped at least 3 percent each, before turning south later in the morning. Tech, real estate and health care stocks took the steepest losses before the market began to recover toward the end of Thursday trading.

Investors have pulled back from the some of the market’s best performing stocks and companies throughout October as rising interest rates and fears of a prolonged trade war scare traders away from equities.

Traders fear that higher borrowing costs driven by Federal Reserve rate hikes will narrow corporate profit margins and drag down stocks that have skyrocketed in value since President Trump’s election.

The Fed has raised rates three times this year, most recently in September, and is expected to do so again in December.

With unemployment close to record lows and economic growth accelerating, the Fed is seeking to raise interest rates quickly enough to prevent rampant inflation without derailing the economy.

Trump has blamed the massive stock sell-off on the Fed, saying the independent central bank “has gone crazy” with “ridiculous” rate hike he deems unnecessary. The president has criticized the Fed since July, breaking from the majority of Republicans who support rate hikes.

“The problem that I have is with the Fed,” Trump said late Wednesday, “The Fed is going wild. I mean, I don’t know what their problem is that they are raising interest rates and it’s ridiculous.”

During a phone interview early Thursday on “Fox & Friends,” Trump continued his criticism, saying the Fed is “getting a little bit too cute.”

“It’s ridiculous what they’re doing,” he said.

Even so, there’s a broad consensus among economists that the U.S. economy could overheat if the Fed does not gradually bring interest rates closer to neutral.

Updated at 5:16 p.m.