por admin » Mié Ago 31, 2022 6:08 pm
S&P 500 Drops 4.2% in August; Fed Is in Focus
Investors await fresh labor-market data as expectations for tighter monetary policy drag shares lower
By Anna Hirtenstein and Eric Wallerstein
Updated Aug. 31, 2022 4:47 pm ET
The S&P 500 dropped 31.16 points, or 0.8%, to 3955, extending its monthly loss to 4.2%. Ten of the S&P 500’s 11 sectors were in the red on Wednesday, with communication services the sole riser on the day, edging up one-hundredth of a percent.
The Dow Jones Industrial Average fell 280.44 points, or 0.9%, to 31510.43. That pushed the blue-chip index to a 4.1% decline in August. The tech-heavy Nasdaq Composite slipped 66.93 points, or 0.6%, to 11816.20, furthering its monthly rout to 4.6%.
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Stocks have come under pressure in the wake of Fed Chairman Jerome Powell’s speech at Jackson Hole, Wyo., where he said interest rates must be raised further until inflation is under control, despite higher recession risk.
“Federal Reserve speakers are stressing that the central bank will not pivot away from tightening anytime soon,” said Quincy Krosby, chief global strategist at LPL Financial. “The question now is how much pain the Fed will deliver, and how long it will take to bring down inflation. The market is trying find an equilibrium with where stocks should be valued based on those expectations.”
New York Fed President John Williams said Tuesday that combating high inflation is likely to require lifting the central bank’s benchmark short-term interest rate above 3.5% and holding it at that level through next year.
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The yield on the benchmark 10-year Treasury note inched higher to 3.131% from 3.107% on Tuesday. Shorter-dated yields continue to be higher, sending a recessionary signal. The two-year yield edged lower to 3.448% from 3.466% on Tuesday, which marked its highest level since 2007.
Investors are now turning their eyes to the health of the labor market for a read on the future path of Fed policy, with Friday’s jobs report in focus.
“The August report is important; if wage pressures come down and there are less job openings, that could be a positive catalyst for stocks,” added Ms. Krosby.
Traders worked on the floor of the New York Stock Exchange on Monday.Photo: Michael M. Santiago/Getty Images
ADP’s employment report for August, released Wednesday, showed private-sector employers added a lower-than-expected 132,000 jobs, a sign the labor market cooled amid slowing economic growth and recession fears. Economists polled by The Wall Street Journal had expected an increase of 300,000 jobs.
Shares of pet retailer Chewy lost 8.2% after it lowered sales guidance for the year, citing changing consumer habits. Bed Bath & Beyond shares plunged 21%. The retailer and meme stock said it plans to close roughly 150 of its flagship stores, cut its workforce and bring in fresh financing.
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Oil prices fell, with global crude benchmark Brent declining 2.8% to $96.49 a barrel. Brent lost 12% in August, marking its worst month since November of last year.
“This is the financial market selling off, it’s the continuation of the bearish macro backdrop,” said Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB. “We have extremely broad-based negative sentiment in commodities.”
Overseas, the pan-continental Stoxx Europe 600 fell 1.1%. A data release showed inflation in the eurozone rose to 9.1% in August, notching a record. A major gas pipeline that connects Western Europe to Russia was shut down on Wednesday for maintenance, causing concern that supplies might not resume.
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In Asia, major benchmarks were mixed. The Shanghai Composite Index fell 0.8% and Hong Kong’s Hang Seng Index closed flat. China’s official gauge of factory activity remained in contraction in August, although it came in a little higher than economists had forecast.
Federal Reserve Chairman Jerome Powell said the central bank must continue raising rates until it is confident inflation is under control. He spoke at the Kansas City Fed’s annual symposium in Wyoming last week. Photo: Jim Urquhart/Reuters