Traders work on the floor of the New York Stock Exchange during morning trading on September 6, 2022 in New York City.
Michael M. Santiago | Getty Images
The Dow Jones Industrial Average fell on Monday as rising interest rates and foreign currency turmoil weighed on markets.
The Dow index fell 1[ads1]23 points, or 0.2 percent. The S&P 500 fell 0.1%, and the Nasdaq Composite rose 0.7%.
The British pound fell to record lows on Monday against the US dollar. Sterling at one point fell 4% to an all-time low of $1.0382. The Federal Reserve’s aggressive hiking campaign, coupled with UK tax cuts announced last week, has sent the US dollar soaring. The euro hit its lowest against the dollar since 2002. A rising dollar could hurt the profits of US multinationals and also wreak havoc on global trade, with so much of it traded in dollars.
“Such US dollar strength has historically led to some sort of financial/economic crisis,” Morgan Stanley’s Michael Wilson, chief US equity strategist, wrote in a note. “If there was ever a time to be looking for something to break, this would be it.”
Traders will keep a close eye on the S&P 500 on Monday for any breakouts during the bear market. S&P’s lowest closing time for the year in June was 3,666.77. It closed Friday at 3,693.23 after briefly trading below that level. The reference index’s lowest intraday for the year is 3,636.87. Any trade below these levels could lead to more selling in the market.
On Friday, stocks ended a brutal week with the blue-chip Dow hitting a new low for the year during the day, closing down 486 points. The broad market S&P 500 temporarily broke below its June close, ending down 1.7%. The technology-heavy Nasdaq Composite lost 1.8 percent.
Another super-sized interest rate hike by the Federal Reserve last week was the catalyst for the latest decline in markets. The central bank indicated it could raise interest rates as high as 4.6% before pulling back. The forecast also shows that the Fed plans to be aggressive this year, raising interest rates to 4.4% before 2022 ends.
Bond yields rose after the Fed adopted a new interest rate increase of 75 basis points. The 2-year and 10-year Treasury yields reached heights not seen in over a decade. On Friday, Goldman Sachs cut its year-end target for the S&P 500 to 3,600 from 4,300.
Yields rose again on Monday, with the 2-year Treasury topping 4.29% at one point in the day.