(Reuters) — Wall Street ended Friday with all three benchmarks down more than 3%, as Federal Reserve chief Jerome Powell’s signal that the central bank would continue to raise rates to keep inflation under control. dashed budding hopes of a more modest trajectory among some investors.
The Nasdaq led the declines among the three U.S. benchmarks, posting its worst daily performance since June 16, weighed by high-growth tech stocks that tumbled after rebounding the day before ahead of Powell’s scheduled speech at the conference. from the central bank in Jackson Hole, Wyoming.
The U.S. economy will need tight monetary policy “for a while” before inflation is brought under control, Powell said at the event. That means slower growth, a weaker job market and “some pain” for households and businesses, he added. Read more
Investors knew more rate hikes were coming, and they were split between a 75 basis point hike and a 50 basis point hike by the Fed next month.
However, recent data pointing to continued strength in the labor market, offsetting two consecutive quarters of negative economic growth, had led some to speculate on a more moderate pace of increases.
“The pullback comes from the idea that it’s not about the pace of the hikes coming and how they tighten financial conditions, but about how long this restrictive policy stance is maintained,” Garrett Melson said. , portfolio strategist at Natixis Investment Managers.
“That’s the nuance they’re trying to drive home and Powell was maybe a little more explicit about that today. But if you’ve listened to other Fed speakers over the last two weeks, it’s the same message.”
With investors repositioning after soaking up the talk, the Cboe Volatility Index jumped 3.78 points to 25.56, its highest close in six weeks.
All of the 11 major S&P 500 sectors were down, led by declines of between 3.9% and 4.3% in the information technology, communication services and consumer discretionary indexes.
The S&P 500 lost 141.46 points, or 3.37%, to end at 4,057.66 points, while the Nasdaq Composite lost 497.56 points, or 3.94%, to 12,141.71. The Dow Jones Industrial Average fell 1,008.38 points, or 3.03%, to 32,283.40.
High-growth and technology stocks fell. Nvidia Corp and Amazon.com Inc fell 9.2% and 4.8%, respectively, after leading the winners in the previous session. Meanwhile, Google-parent Alphabet Inc, Meta Platforms Inc and Block Inc also fell between 4.1% and 7.7%.
US equity indices have fallen year-to-date as investors price in expectations of aggressive interest rate hikes and a slowing economy.
But they have rallied strongly since June, with the S&P 500 recouping nearly half of its losses for the year on stronger-than-expected quarterly earnings and hopes inflation, which has been high for decades, has peaked.
However, Friday’s falls wiped out modest August gains that all three benchmarks had previously made and sent the trio to its second consecutive week of declines.
For the week, the Nasdaq slipped 4.4%, the Dow Jones lost 4.2% and the S&P 500 fell 4%.
Previous data showed that consumer spending barely rose in July, but inflation fell significantly, which could give the Fed some leeway to scale back its aggressive interest rate hikes. Read more
Dell Technologies Inc fell 13.5% as it joined rivals in predicting a slowdown, inflation and a darkening economic outlook prompting consumers and businesses to tighten their purse strings. Read more
Affirm Holdings Inc fell 21.3% after the buy-now-pay-later lender forecast full-year revenue below Wall Street estimates, underscoring the broader slowdown in the fortunes of the once-high fintech sector flight.
Volume on U.S. exchanges was 10.37 billion shares, compared to an average of 10.64 billion for the full session over the past 20 trading days.