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STORY: Wall Street tanked in a broad sell-off on Thursday, as investors worried that the Federal Reserve's restrictive monetary policy will remain in place longer than anticipated.

The Dow lost more than 1%, the S&P 500 shed 1.6% and the Nasdaq plunged 1.8%.

The risk-off sentiment came one day after Fed Chair Jerome Powell warned inflation still has a long way to go before approaching the central bank's 2% target – with the Fed projecting that interest rates will remain elevated through next year.

That helped push U.S. Treasury yields on Thursday to a 10-year peak.

An unexpected 9% drop in initial jobless claims, to the lowest level in eight months, added to concerns that the Fed may hike rates again before year’s end.

George Cipolloni, Portfolio Manager at Penn Mutual Asset Management, says investors are just going to have to contend with the new reality of “higher for longer.”

“What it does is it increases the cost of capital. It will decrease the credit quality of companies as interest expense goes up in the income statement. And obviously it's created a lot of pressure on bond prices. [FLASH] Companies have to make good decisions from a financial perspective - versus going through the whole zero-interest rate policy where it was just easy to raise capital and get money.”

In company news, shares of semiconductor firm Broadcom slid nearly 3% following a report that Google executives discussed dropping the company as a supplier of artificial intelligence chips as early as 2027.

Klaviyo gained 3% the day after its debut as a public company, while another recent IPO, Arm Holdings lost 1.4%, closing just a dollar above its $51 offer price.

And Fox and News Corp gained 3.2% and 1.3%, respectively, following news that Rupert Murdoch will step aside as chairman, with son Lachlan succeeding him.