Powell scared the Wall: Dow sell-off 1,000 points, Nasdaq tumbles 4%

The nervous wait with cautious moves was followed by the sell-off on Wall Street, after… Powell spoke. The head of the US central bank indicated during his speech at the economic symposium in Jackson Hole that he is leaning towards aggressive tightening of monetary policy in the future until inflation is brought under control.

He warned, in fact, that the fight against inflation in the United States “will hurt households and businesses” but if this is not done the damage to the economy will be even greater, and he pointed out that the Fed will “powerfully use its tools” by increasing interest rates.

Somewhere there, Wall’s main indices began to enter the “red”, to gradually accelerate their decline, finally reaching losses of more than 3%.

In particular, the industrialist Dow slipped 3.03% or 1,008.98 points to 32,282.80, the broadest S&P 500 and the technologically weighted lost 3.37% to 4,057.74 points Nasdaq fell by 3.94% to 12,141.71 units.

In the week losses are even heavier as the Dow lost 4.2%, the S&P 500 closed down -4% and the tech index fell lower at -4.4%

It is characteristic that none of the 30 shares industrial index, posted no gains today. At the bottom was 3M with a decline of 9.65%, followed by Salesforce (-4.97%), Intel (-4.39%) and Nike (-4.35%). The tech giants were also in a stranglehold, with Meta losing 4.15%, Amazon closing at -3.76%, Apple at -3.77% and Netflix at -4.57%.

Electronics Arts stock added 3.57% after reports that Amazon.com plans to announce a takeover bid for the video game maker. Losses of around 1.9% for Gap dragged by the general mood, even though its sales beat Wall Street expectations. “Plunge” 11% for Dell, in the wake of its results that showed revenue below analysts’ estimates.

In his long-awaited speech, Mr Powell he stressed that a return to price stability “will take time” and lead to “a long period of weaker growth” as well as “a slowdown in the labor market”, he stressed.

Even with a run of four consecutive rate hikes totaling 2.25 percentage points, Powell said this is “not a point to stop” even though rates are likely around an area that is considered neither supportive nor constraining to growth .

“We are deliberately moving our policy to a level that will be restrictive enough to return inflation to 2 percent,” Powell said. Looking ahead, the Fed chief added that “restoring price stability will likely require maintaining restrictive policy for some time. The historical record strongly cautions against premature policy easing.”

However, the central banker’s statements did not come as a surprise, since analysts estimated in recent days that Powell would adopt an aggressive stance in his speech, confirming that the bank’s main goal is to bring inflation to the 2% target, regardless of the effects on economy.

Earlier, the fall in the personal consumption expenditure index (the Fed’s preferred measure of inflation) rekindled hopes that inflation has hit its highs and is beginning to slow, which could allow the Fed to ease its interest rate hikes.

Particularly, the price index for personal consumption expenditures fell 0.1% in July from the previous month, while the structural index – excluding energy and food – rose just 0.1%, according to data announced today by the US Commerce Department.

It is noted that in June from May, the index had jumped 1%, while on a structural basis it had strengthened by 0.6%. A slowdown is also recorded in the 12 months, with the annual index slowing to 6.3% in July from 6.8% the previous month and the structural index to 4.6% from 4.8%.

In fact, shortly after the PCE data, the head of the Fed’s Atlanta branch, Rafael Bostic, took position in favor of a milder increase in Fed interest rates. “I’m leaning more toward 50 basis points for September,” he said, noting, however, that “there’s still data we expect to see before the September meeting.”

At other times of the day, the initial data announced in the US for the country’s commercial transactions showed a decline of 9.7% in the trade deficit in July to $89.1 billion from $98.6 billion the previous month.

End, the yield on the 10-year government bond of the US increased by 1.1 bp. to 3.034%, while in the week it gained 4.7 bp. Accordingly 2 years old climbed to 3.391% gaining 1.9 bp, while on the week it added 12.6 bp. This was the fourth consecutive week of gains for bonds.