Wall Street ends well down as Powell’s speech affirms hawkish rate stance

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, Aug. 15, 2022. REUTERS/Brendan McDermid/File Photo

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  • Fed will continue to tighten until inflation is under control – Powell
  • Core PCE up 0.1% in July vs. 0.6% increase in June
  • Dell, Affirm tumble on weaker forecasts

Aug 26 (Reuters) – Wall Street slumped to close well on Friday as investors seeking a more modest interest rate were disappointed by Federal Reserve Chief Jerome Powell, who announced the central bank would continue to raise interest rates to keep interest rates low. to tame inflation.

The Nasdaq led the declines between the three US benchmarks, weighted by high-growth technology stocks that plunged after a rally the previous day ahead of Powell’s scheduled speech to the Jackson Hole central banking conference in Wyoming.

The US economy will need tight monetary policy “for some time” before inflation is under control, Powell said at the event. That means slower growth, a weaker labor market and “some pain” for households and businesses, he added. read more

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Investors knew there were more rate hikes to come, and they are divided on whether the Fed should expect a 75 basis point hike or a 50 basis point hike next month.

However, recent data showing continued strength in the labor market, offsetting two consecutive quarters of negative economic growth, had led some to speculate that a more moderate pace of increases could emerge.

“The backlash comes from the idea that it’s not about the pace of future increases and how they tighten financial conditions, but the length of time it takes to stick to those restrictive policies,” said Garrett Melson, portfolio strategist at Natixis Investment Managers.

“That’s the nuance they’re trying to bring out and Powell may have been a little more explicit about that today. But if you’ve been listening to other Fed speakers over the past few weeks, it’s the same message.”

Reuters Graphics Reuters Graphics

All 11 major S&P 500 sectors were lower, with the information technology (.SPLRCT), communications services (.SPLRCL) and consumer goods (.SPLRCD) indices leading the way.

According to preliminary data, the S&P 500 (.SPX) lost 140.83 points, or 3.35%, to end at 4,058.29 points, while the Nasdaq Composite (.IXIC) lost 496.39 points, or 3.93%. lost to 12,142.88. The Dow Jones Industrial Average (.DJI) fell 1,003.74 points, or 3.01%, to 32,288.04.

US two-year Treasury yields, weighing on mega-cap growth and technology stocks, briefly rose to their highest level since October 2007, before stabilizing around a two-month high.

High-growth and technology stocks fell.

Nvidia Corp (NVDA.O) and Amazon.com Inc, who were the winners in the previous session, fell. Meanwhile, Google parent company Alphabet Inc (GOOGL.O), Meta Platforms Inc (META.O) and Block Inc (SQ.N) also fell.

US stock indices have fallen since the turn of the year as investors anticipated expectations of aggressive rate hikes and a slowing economy.

But they have rebounded strongly since June, with the S&P 500 making up nearly half of its losses for the year on stronger-than-expected quarterly gains and hopes that decades-long high inflation has peaked.

Previous data showed that consumer spending barely rose in July, but inflation eased significantly, which could give the Fed room to curb its aggressive rate hikes. read more

Dell Technologies Inc fell as it predicted a slowdown along with rivals as inflation and the obscuring economic outlook prompted consumers and businesses to pull out their wallets. read more

Affirm Holdings Inc (AFRM.O) collapsed after buy-now-pay-later lender forecast full-year sales below Wall Street estimates, signaling the broader downturn in the once fortunes. so high-flying fintech sector underlines.

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Reporting by Bansari Mayur Kamdar, Devik Jain, Anisha Sircar and Sruthi Shankar in Bengaluru and David French in New York; Editing by Maju Samuel, Aditya Soni and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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