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Wall St slips as Powell sticks to hawkish stance By Reuters


© Reuters. FILE PHOTO: Fed Chair Jerome Powell speaks at a press conference following a two-day Federal Open Market Committee (FOMC) meeting in Washington, US, July 27, 2022. REUTERS/Elizabeth Frantz


By Sruthi Shankar and Ankika Biswas

(Reuters) – US stock indices fell Thursday after a general recovery in the previous session, as aggressive comments from Federal Reserve Chairman Jerome Powell boosted bets on another major rate hike later this month.

The Fed is “strongly committed” to controlling inflation, but hope remains that it can be done without the “very high social costs” associated with past inflation battles, Powell said in comments at a Cato Institute conference.

“Obviously he’s kept his existing aggressive tone and the markets still seem surprised, so they’re selling some of it,” said Randy Frederick, general manager of trading and derivatives for Charles Schwab (NYSE:) in Austin, Texas.

Wall Street’s major indices rose the most in about a month on Wednesday, as bond yields slipped after a recent rise fueled by expectations of higher interest rates. Still, the benchmark remains close to 8% from its August peak and is down about 17% year-to-date.

Hawkish comments from Fed officials and recent data pointing to strength in the US economy have prompted money markets to bet that the Fed will raise interest rates by 75 basis points at this month’s meeting. Fed futures implied that traders estimate a near 90% chance of such a move.

Goldman Sachs (NYSE:) also raised its policy rate forecast this month from 50 basis points earlier to an increase of 75 basis points.

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Data showed that the number of Americans filing new unemployment benefits fell to a three-month low last week, highlighting the robustness of the labor market even as the Fed raises rates.

Concerns about a recession, fueled by aggressive central bank rate hikes and signs of economic slowdown in China and Europe, have slowed global demand for risky assets this year.

The European Central Bank raised its key interest rates by an unprecedented 75 basis points on Thursday, signaling further hikes. This follows major interest rate hikes from the Bank of Canada and the Reserve Bank of Australia earlier this week.

At 10:02 AM ET, the S&P 500 fell 103.90 points or 0.33% to 31,477.38, the S&P 500 fell 10.81 points or 0.27% to 3,969.06 and fell 32.85 points or 0.28% to 11,759.05.

Eight of the 11 major S&P sectors were lower, with consumer staples and communications services losing out. Financials were up 0.5% following the increase in revenues. [US/]

GameStop Corp (NYSE:) rose 2.7% after the video game retailer reported a smaller-than-expected quarterly loss.

American Eagle Outfitters (NYSE:) Inc fell 9.6% after the retailer missed second-quarter earnings estimates and said it would pause its quarterly dividend as it strengthens its finances against a blow from inflation.

The number of declining issues outpaced the avant-garde with a 1.85-to-1 ratio on the NYSE and a 1.42-to-1 ratio 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.


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