US stock indexes fell on Monday, adding to a sharp sell-off last week as investors worried about the Federal Reserve’s plan to raise interest rates in its fight against inflation, even at the cost of an economic slowdown.
Fed Chairman Jerome Powell said on Friday that the US economy will need tighter monetary policy “for some time” before inflation is brought under control, after recent data suggested price pressure increased after more modest rate hikes. Hope rejected.
“Investors are coming to terms with the idea that the Fed is serious about curbing inflation,” Rod von Lipsey, managing director of UBS Private Wealth Management, said in a note.
“We believe the economic data justifies a 50 or 75 basis point increase in the September meeting, an additional 25 or 50 basis point rate hike in the November and December meetings to stay ahead of inflation trends. Chances are.”
Money market traders are pricing in a 64.5% chance of a straight 75-basis-point interest rate hike in September and expect the fed funds rate to end the year at around 3.7%.
Heavyweight technology and growth stocks such as Apple Inc., Microsoft Corp. and Tesla Inc. were down between 1.1% and 1.5%, impacted by rising US Treasury yields.
The US two-year Treasury yield, which is particularly sensitive to interest rate expectations, briefly edged higher to 15-year highs, while yields measured by the difference between the two- and 10-year yields The curve remained strongly inverted.
A reversal is seen by many as a credible sign of an impending recession.
At 10:13 am, the Dow Jones Industrial Average was down 214.13 points, or 0.66%, at 32,069.27, the S&P 500 was down 20.78 points, or 0.51%, at 4,036.88, and the Nasdaq Composite was down 69.95 points, or 0.58. %, at 12,071.77.
The CBOE’s volatility index, Wall Street’s fear gauge, rose to a seven-week high of 26.92.
The benchmark S&P 500 index has climbed about 11% since mid-June, but is still in a bear market after falling earlier this year. Some investors fear a tough September due to seasonal weakness and panic about the economic pain from rising interest rates.
“We went from a Powell ‘put’ in June to a Powell ‘put down’ in August. So the market following his guidance from June had to pull that rally back,” said David Waddell, chief investment strategist at Waddell. and Associates.
“The market is a trader’s paradise right now… the economic background will have to prove a reason to be optimistic. Until then, traders will swing between optimism and pessimism based only on what the Fed says.”
Energy stocks rose 2.5%, tracking a more than 2% jump in oil prices as potential OPEC+ production cuts and the conflict in Libya helped offset a stronger US dollar.
Bristol Myers Squibb fell 6.2% when a drug candidate to prevent ischemia stroke missed a key target in a mid-stage trial.
After KeyBanc downgraded the chemical company’s shares from “sector weight” to “underweight,” Dow Inc. and Liondale Basel Industries fell 1.9% and 1.5%, respectively.
The number of issues declined to a 2.16-to-1 ratio on the NYSE and to a 1.89-to-1 ratio on the Nasdaq.
The S&P index recorded 2 new 52-week highs and 20 new lows, while the Nasdaq recorded 11 new highs and 131 new lows.
This story has been published without modification in text from a wire agency feed.
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