The Dow Jones Industrial Average fell Monday after rising interest rates and foreign exchange turmoil put pressure on markets.
The Dow fell 76 points, or 0.3%. The S&P 500 gained 0.2% and the Nasdaq Composite rose 1.1%.
consumer discretionary and information technology supported stocks, both up 1.3% and 0.8% respectively. Casino stocks led to outperformance. Wynn Resorts was up 12.4% and Las Vegas Sands was up 11%. Tech stocks Enphase Energy and Salesforce were up 2.3% and 1.9%.
The British pound fell to a record low against the US dollar on Monday. Sterling at one point fell 4% to an all-time low of $1.0382. The Federal Reserve’s aggressive raising campaign, coupled with tax cuts announced last week in the UK, have caused the US dollar to appreciate. The euro hit its lowest point against the dollar since 2002. A soaring dollar could hurt the profits of US multinationals and wreak havoc on world trade, as much of it is traded in dollars.
“Such strength in the US dollar has led to a kind of financial/economic crisis in the past,” Michael Wilson, chief strategist for US equities at Morgan Stanley, wrote in a note. “If ever there was a time to look for something to break, this would be it.”
Traders will be watching the S&P 500 closely on Monday for any break below the bear market’s low. The S&P’s lowest closing price for the year in June was 3,666.77. It closed at 3,693.23 on Friday after trading briefly below that level. The benchmark intraday low for the year is 3,636.87. Any trade below those levels could lead to more sales in the market.
On Friday, stocks closed out a brutal week with the blue-chip Dow finding a new intraday low for the year, closing 486 points lower. The broad-based S&P 500 temporarily broke below the June low, ending 1.7%. The tech-heavy Nasdaq Composite lost 1.8%.
Another super-large rate hike by the Federal Reserve last week was the catalyst for the latest downward move in the markets. The central bank said it could raise interest rates by up to 4.6% before pulling out. The forecast also shows that the Fed plans to be aggressive this year, raising interest rates to 4.4% before the end of 2022.
Bond yields skyrocketed after the Fed introduced another 75 basis point rate hike. The 2-year and 10-year Treasury yields hit highs not seen in more than a decade. Goldman Sachs lowered its year-end target for the S&P 500 from 4,300 to 3,600 on Friday.
Interest rates rose again on Monday, with the 2-year Treasury trading above 4.29% at some point in the day.