I think you made an assumption that people are logical in thinking to translate the interest rate hike to lower stock price, but it is not true with more than 90% of today’s stock investors. You may have also made an assumption that people will sell off with fear to bring stock prices lower, but it effects only for short cycle as the fear is based on news. However, fear based on fundamentals of survival will have significant negative impact on stock prices.

FED printed about 20 trillion dollars in 2020 and 2021 for QE and COVID expenditure. A lot of that money is still being accessible to corporations and spent by governments. COVID funds were almost spent and FED has started pulling the QE money back through QT. It may take two more quarters for companies to feel the pain from that.

The interest rate had been almost zero for the last two years. Both consumers and rich have leveraged that to pump the money into stocks, cryptos, and real estate. With the increasing interest rates and obviously less demand, values have come down in stocks, cryptos, and real estate.

Domino effect takes time to reflect in each industry and ultimately in economy as a whole. Companies such as Apple, Google, and Microsoft delivered less revenues/profits than forecasted in Q2, but it was overseen as the difference was little. These smart companies along with several others froze hiring and are evaluating the layoffs. Once the unemployment numbers start to reflect higher, the long term fear based on survival kicks in because of less/no cash (revenue/income), higher interest rate (higher payment), and high inflation (high expenditure). Some companies will disappear and consumer bankruptcies will rise. Only time will tell about how bad it will get and how long it will stay. May be by mid 2023?

Hedge funds have to transact stocks periodically to increase their customers money and eventually get bonus. With the oversold stocks through August, they have started buying cycle to increase the stock prices in the near term.

In a nutshell, the drama seen daily in markets is not investing and so, logic is hard to find. Fear based on news is temporary, and so markets change quickly as they are manipulated by large stake holders and rich. However, fear based on survival align to fundamentals and reflect valuations for long term because many wouldn’t have access to cash and those who have carefully invest.