Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.
What Happened? On April 27, 1998, a Wall Street Journal article titled “Fed Ponders Rate Boost in Months Ahead” at the time sent the Dow Jones Industrial Average tumbling 2.5%.
Where The Market Was: The Dow finished the day at 8,917.64. The S&P 500 traded at 1,086.54.
What Else Was Going On In The World? In 1998, Larry Page and Sergey Brin founded Google in Menlo Park, California. St. Louis Cardinal Mark McGwire hit 70 home runs, breaking Roger Maris’ 37-year-old single-season record. The average monthly rent in the U.S. was $619.
Interest Rate Threat Spooks Investors: Prior to the WSJ article in April 1998, the S&P 500 had surged 43.6% in the previous year. However, the Dow plummeted 223 points in a matter of minutes on the mere suggestion that the Fed could choose to raise interest rates.
The one-day drop eliminated $233 billion of value from the market and triggered a wave of investors to switch 401(k) investments from stock funds to bond funds and cash.
Fortunately, the knee-jerk reaction in the stock market was short-lived, and the Dow finished the week up 82 points. Ironically, the next rate decision the Fed actually made was to cut rates by 0.25% in September 1998 in response to the long-term capital management hedge fund crisis.
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