U.S. markets fall broadly, adding to recent losses after Fed chairman’s inflation speech


Stocks fell broadly in morning trading on Wall Street Monday, adding to their recent losses as the Federal Reserve stays focused on raising interest rates to fight historic levels of inflation.

The S&P 500 fell 0.3 per cent as of 10:23 a.m. ET. Around 70 per cent of stocks in the benchmark index lost ground. It is coming off of its biggest single-day and weekly drop since mid-June.

The Dow Jones industrial average fell 141 points, or 0.4 per cent to 32,134 and the Nasdaq fell 0.2 per cent.

Technology stocks were among the biggest weights on the market. Apple slipped 0.7 per cent.

Health-care stocks also fell sharply. Drug delivery technology company Catalent slumped 8.8 per cent after giving investors a disappointing revenue forecast.

Energy stocks made gains as U.S. crude oil prices rose 2.6 per cent. Exxon Mobil rose 3.4 per cent.

The yield on the 10-year treasury rose to 3.10 per cent from 3.03 per cent late Friday.

Inflation, its impact on the economy and the Fed’s battle plan remain Wall Street’s main focus. Last week, the central bank indicated it will raise rates into next year as it tries to quell demand and bring down prices for goods and services.

The Fed’s last two hikes have been by 0.75 points, and Wall Street is expecting a third such increase in September, according to CME Group.

Some investors had hoped that the Fed would ease up on rate hikes into next year if inflation subsides. That sentiment led to a rally for stocks in July and early August.

Investors have been closely watching economic reports to get a better sense of how much the economy is slowing and whether inflation is starting to cool from the hottest levels in four decades.

The Fed’s preferred gauge of inflation decelerated last month, while other data shows consumer spending slowed. Wall Street will get several more updates on the economy this week.

The U.S. federal government will release its closely watched monthly jobs report on Friday. The employment market has remained resilient amid a broader slowdown for the economy. That has helped temper worries that the U.S. is facing a potential recession.

Federal Reserve chairman Jerome Powell speaks during a news conference in Washington, on July 27. On Friday, Powell said the Fed will likely impose more large interest rate hikes in coming months to tame record-high inflation. (Manuel Balce Ceneta/The Associated Press)

The message from Federal Reserve chair Jerome Powell in a speech Friday had been expected, though some hoped it would be less emphatic.

“The market apparently was looking for something a little more neutral. After all the talk of a ‘pause’ and ‘pivot,’ none of which ever made any sense with a Fed that has said several times it will keep hiking rates even if it means some economic pain, we are back to Square 1 with a Fed outlook to keep tightening,” said Clifford Bennett, chief economist at ACY Securities.

“The Fed was always going to keep raising rates aggressively, but the market decided to price in a slowing in hikes, and even a reversal.”

World stocks hit by Fed speech

A person stands in front of an electronic stock board showing Japan’s Nikkei 225 index at a securities firm Monday in Tokyo. Asian shares declined Monday after the head of the U.S. Federal Reserve indicated high interest rates will continue for some time to curb inflation. (Eugene Hoshiko/The Associated Press)

European markets were also lower and Asian markets closed lower overnight. Chinese economic data showing a drop in industrial profits indicated that a strong recovery there will take time, amid fresh COVID-19 restrictions.

Japan’s benchmark Nikkei 225 dipped 2.7 per cent to finish at 27,878.96. Australia’s S&P/ASX 200 dropped two per cent to 6,965.50. South Korea’s Kospi slipped 2.2 per cent to 2,426.89. Hong Kong’s Hang Seng slid 0.7 per cent to 20,023.22, while the Shanghai Composite recouped earlier losses and edged up 0.1 per cent to 3,240.73.

“The risk-off mood is playing out in Asia’s session today as well, as bearish sentiments follow through with the sell-off in Wall Street to end last week while U.S. futures continue to suggest no reprieve into the new week,” said Yeap Jun Rong, market strategist at IG in Singapore.

Powell spoke last week at an annual economic symposium in Jackson Hole, Wyo., that has been the setting for market-moving Fed speeches in the past.

He said the Fed will likely need to keep interest rates high enough to slow the economy “for some time” in order to beat back the high inflation sweeping the country. The Fed has already hiked its key overnight interest rate four times this year in hopes of slowing the worst inflation in decades.

Higher rates help corral inflation, but they also hurt asset prices. Powell acknowledged the increases will hurt U.S. households and businesses, in perhaps an unspoken nod to the potential for a recession. But he also said the pain would be far greater if inflation were allowed to fester and that “we must keep at it until the job is done.”

In energy trading, benchmark U.S. crude rose 13 cents to $93.19 US a barrel. Brent crude, the international standard, added 11 cents to $99.12 a barrel.

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