Wall Street’s indexes started the week on a down note after Friday’s slide that followed Federal Reserve Chairman Jerome Powell’s hawkish remarks on inflation in his speech at the bank’s economic symposium in Jackson Hole, Wyoming.
The indexes were in free fall on Friday, with the Dow Jones down 1,008.38 points, or 3%, to close at 32,283.40. This was the biggest drop since May 18 for the industrial index. The broader S&P 500 lost 3.4% to 4,057.66, while the tech-heavy Nasdaq plunged 3.9% to 12,141.71.
The shocks followed aggressive statements by the Fed chairman about the need to control inflation, with Jerome Powell even warning that the central bank will continue its efforts to rein in inflation even if it means more “pain” for households. and businesses. Investors’ hopes for milder rate hikes from the Fed were dashed after Powell’s remarks.
“Reducing inflation is expected to require a prolonged period of below-normal growth,” Powell said. “Higher interest rates, slower growth and weaker labor market conditions will reduce inflation, but will also bring some pain to households and businesses,” he warned.
Indicators – Statistics
On the board, the Dow Jones lost 204.74 points, or -0.63%, to 32,078.66, while the S&P 500 fell 19.74 points, or -0.49%, to 4,037.22. The tech Nasdaq lost 52.29 points, or -0.42%, to 12,090.60.
Of the 30 stocks that make up the Dow Jones industrial index, only Chevron moved in upward territory, with gains of 0.98% to $165.01.
The biggest losers are the Dow (-2.41%), Travelers (-1.85%) and 3M (-1.49%).
Markets now see a 65% chance the Fed will raise interest rates by 75 basis points at the September meeting, up from about 57% before Powell’s speech.
Meanwhile, U.S. Treasury yields are rising, with the 10-year yield climbing as high as 3.13 percent and the two-year yield strengthening to its highest level since 2007 at 3.489 percent before paring gains.
But in Europe, yields are also strengthening, with the German 10-year bond climbing up to 1.5% in the wake of aggressive statements by European Central Bank officials about the need to step up efforts to curb inflationary pressures.
Austrian Robert Holzmann and Dutch Klaas Knot floated the possibility of a 75 basis point rate hike at the next meeting in September, while Executive Committee member Isabel Schnabel warned that the risk of inflation expectations being derailed was now too high. .
Source: Capital
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