The Dow Jones Industrial Average fell more than 1,000 points on Thursday, wiping away the gains from Wall Street’s largest surge in two years, as fears mount that the Federal Reserve’s increased interest rates in its fight against inflation may derail the economy.

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The benchmark S&P 500 plunged 3.6%, its worst drop in almost two years, only one day after posting its best rise since May 2020. The Nasdaq fell 5%, its worst decrease since June 2020. The Dow and other indices’ losses cancelled out the previous day’s gains.

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On Wednesday, the Federal Reserve announced a widely expected half-percentage point increase in its short-term interest rate. Stocks bounced around following the move but then sharply rose as bond yields fell after Fed Chair Jerome Powell reassured investors by saying the central bank wasn’t considering shifting to more aggressive, three-quarters point rate hikes as the Fed continues with further rate increases in coming months.

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But whatever relief Powell’s remarks gave stock investors vanished Thursday. Stocks slumped and bond yields climbed. The yield on the 10-year Treasury note rose to 3.04%. Rising yields are sure to put upward pressure on mortgage rates, which are already at their highest level since 2009.

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The S&P 500 fell 153.30 points to 4,146.87, while the Nasdaq slid 647.16 points to 12,317.69. The Dow briefly skidded 1,375 points before closing down 1,063.09 points, or 3.1%, to 32,997.97.

Smaller company stocks also fell sharply. The Russell 2000 fell 78.77 points, or 4%, to 1,871.15.

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Higher oil and gas prices have been contributing to the uncertainties weighing on investors as they try to assess how inflation will ultimately impact businesses, consumer activity and overall economic growth.

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Homebuilders fell broadly Thursday as average long-term home loan rates climbed. D.R. Horton slid 5.8%.

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The average rate on a 30-year fixed-rate mortgage rose to 5.27% this week, its highest level since 2009, according to mortgage buyer Freddie Mac. A year ago, it averaged 2.96%. Mortgage rates tend to follow moves in the 10-year Treasury yield. The sharp increase in mortgage rates has strained affordability for homebuyers after years of sharply rising prices.