the dow jones industrial average tumbled over 900 points on thursday afternoon putting us stocks on track for their worst day in three months as investors continued to digest tough talk from the federal reserve on inflation that revived concerns about a potential us recession stocks posted moderate losses wednesday after the federal reserve delivered a halfpoint rate hike and signaled that rates would likely peak above 5 in 2023 stocks saw losses deepen thursday a day after the fed delivered a sobering assessment of its continuing inflation battle and as investors reacted to disappointing november retail sales the federal reserve hiked its interest rate by half a percentage point on wednesday with the benchmark rate projected to top out at 525 higher than their september forecast of 475 the stock indexes closed down on wednesday afternoon after feds announcement but well off their session lows eric merlis managing director and cohead of global markets at citizens thinks thursdays sharp selloff is what investors should have anticipated from feds rate hike and chair powells news conference the market waited to hear what the european central bank and bank of england had to say before getting a firmer commitment on an equity deal merlis told marketwatch via phone both the european central bank and bank of england hiked their key lending rates by 50 basis points thursday but policy makers at the ecb emphasized that market participants should prepare for a series of rate hikes to come however merlis thinks the feds peak rate forecast of above 5 should have been completely expected by markets i thought the terminal rate should be somewhere between 5 and 55 thats sort of where the feds standing right now at least on the dots in the summary of economic projections he said i dont think they fed ve signaled a pivot i think they signaled continued willingness to look at data and reiterated that inflation is still too high see the fed is going to overdo it financial markets react to us central banks 2023 rate outlook and weak data in economic data sales at us retailers fell by 06 in november worse than the 03 contraction forecast from economists polled by the wall street journal and the worst reading in more than a year other data included weekly jobless claims and the empire state manufacturing index which declined to negative 112 in december meanwhile fed data showed industrial production fell 02 in november the second straight monthly decline thursdays retail sales report grabbed investors attention as it showed that torrid inflation and rising borrowing costs appeared to finally be taking a toll on us consumers the 06 mm fall in retail sales in november suggests that the resilience of consumers to much higher interest rates is starting to crumble said andrew hunter senior us economist at capital economics hunter also pointed out that retail sales weakened in november despite the boost to real incomes from the continued sharp falls in gasoline prices in recent weeks and suggests that higher borrowing costs slower employment growth and an unusually low saving rate are now catching up with consumers stocks and other assets have vacillated between gains and losses this week as investors digested a raft of economic data and central bank rate hikes concerns that the fed might exacerbate job losses and a contraction in corporate profits by refusing to cut interest rates next year are again weighing on stocks the federal reserve remains committed to taming inflation by keeping monetary policy tight as jerome powell emphasized in his press conference which is not great news for the stock market and supports the bear market continuing into 2023 said james demmert chief investment officer at main street research