US stock indexes slipped on Thursday after a broad-based recovery in the previous session as sharp remarks from Federal Reserve Chairman Jerome Powell strengthened bets of another big interest rate hike later this month.
Powell said in remarks at a Cato Institute conference that the Fed is “strongly committed” to controlling inflation, but hopes it can be done without “too much social cost.”
“Clearly they’ve maintained their current bullish tone, and the markets are still surprised, so they’re selling it,” said Randy Frederick, Charles Schwab’s managing director of trading and derivatives in Austin, Texas.
Wall Street’s main indexes climbed by the most in nearly a month on Wednesday as bond yields retreated recently, driven by expectations of higher interest rates. Still, the benchmark S&P 500 is down about 8% from its August peak and down about 17% year-over-year.
Hawkish remarks from Fed officials and recent data signaling strength in the US economy have prompted currency markets to bet that the Fed will raise interest rates by 75 basis points at this month’s meeting. Traders implied in fed funds futures were pricing in an almost 90% probability of such a move.
Goldman Sachs also this month raised its policy rate forecast from 50 basis points to 75 basis points.
Data showed the number of Americans filing new claims for unemployment benefits fell to a three-month low last week, underscoring the strength of the labor market despite the Fed raising interest rates.
Concerns over a recession, aggressive central bank rate hikes and signs of an economic slowdown in China and Europe have dampened appetite for risk assets globally this year.
The European Central Bank on Thursday raised its key interest rates by an unprecedented 75 basis points, signaling further hikes. It follows large rate hikes by the Bank of Canada and the Reserve Bank of Australia earlier this week.
At 10:02 am, the Dow Jones Industrial Average was down 103.90 points, or 0.33%, at 31,477.38, the S&P 500 was down 10.81 points, or 0.27%, at 3,969.06, and the Nasdaq Composite was down 32.85 points, or 0.28. %, at 11,759.05.
Eight of the 11 major S&P sectors were lower, with consumer staples and communications services leading losses. Tracking gains in yields, Financials rose 0.5%.
GameStop Corp. rose 2.7% after the video game retailer reported a lower-than-expected quarterly loss.
American Eagle Outfitters Inc fell 9.6% after the retailer missed second-quarter profit estimates and said it would withhold quarterly dividends as it strengthens its finances against a hit from inflation.
The number of issues declined to a 1.85-to-1 ratio on the NYSE and 1.42-to-1 on the Nasdaq.
The S&P index recorded three new 52-week highs and seven new lows, while the Nasdaq recorded 20 new highs and 90 new lows.
This story has been published without modification in text from a wire agency feed.
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