What can make a stock market fall when there is an interest rate hike?

Answer 1

It is a very interesting question. It appeared to me as if someone is asking in a 'class room' setting. And the answer is neither obscure nor inaccessible.
There seem to be at least two routes for the relationship to exist. One, high interest rates bring about a fall in bond values because of the high-interest-low yield phenomenon. Then from the bond markets, there is a transmission effect on to the equity markets.
Two, high interest rates make financing dearer and even scarce and this impedes buying. In consequence, floating stocks accumulate and bring about a fall in the market.

Answer 2

To the previous answers...not that simple. Higher interest rates also affect corporate earnings. In a rising interest rate environment...companies who's balance sheet is highly leveraged or companies who rely on borrowing to fund operations, earnings will be negatively affected. Fundamentals generally move stocks.....earnings power moves stocks....if you listen now...there is talk we have peaked in the earnings growth...why? we have had interest rate hikes for the past 4 years or so.....therefore those compaines who have contiued to borrow to fund operations may see earnings growth slow due to higher interest expense on their balance sheet.

It's all about earnings and free-cash flow....look at companies with low-debt to equity ratio's. GE, MSFT, MO and the like.

Answer 3

When interest rates go up, there now exists more opportunity to move funds into safer investments (bonds and bank instruments) that will now pay a higher return. People sell their stocks and put their money into these...

Answer 4

Higher interest rates provide more competition with the market for investment dollars. It is that simple.

Answer 5

Unemployment, Hurricanes, War...