Wall St stumbles after weak data, comments hawkish Fed

Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked concerns that the central bank may not halt rate hikes anytime soon.

Before the market opened, US economic data showed retail sales and producer prices fell more than expected in December. Production at US factories also fell more than expected in December, and production last month was weaker than previously thought.

With Wall Street’s grand average showing gains so far for 2023, Sam Stovall, investment strategist at CFRA research, said some investors saw the weekly data as an opportunity to take profits while others worried about the prospect of a recession.

“The market was overbought. Today’s economic data acted as a trigger to start a period of excess, and the groups with the most profit to take have been the best performers of last year,” Stovall said.

At 2:14 p.m. ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and Nas.IX Composite. ) fell 87.02 points, or 0.78%, to 11,008.10.

The weakest sectors on the day are consumer durables (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which were last down 1.8%.

The benchmark S&P and blue-chip Dow were both on track for their second consecutive day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.

US stocks had started 2023 on a solid footing, with the S&P having closed up nearly 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to reduce the size of rate hikes. .

About halfway through January, the S&P was up 2.7% for the month so far, while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.

Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed the need to raise interest rates beyond 5% to turn inflation around.

The Fed comment also highlighted the difference between the US central bank’s estimate of the terminal rate and market expectations, which peaked at 4.88% by June. Traders are now betting on a rate hike of 25 basis points in February.

“This market is very hopeful that we’re going to get a soft landing, and any time you have hawkish comments from the Fed, it feels like you’re not going to get that,” Dennis Dick, trader at Triple D Trading.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect annual earnings from S&P 500 companies to fall 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline at the start of the year.

IBM Corp ( IBM.N ) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight.”

Early gains Microsoft Corp ( MSFT.O ) and Tesla Inc ( TSLA.O ) erased gains in late afternoon trading with Microsoft down 1.2% and Tesla down 2.7%.

Moderna Inc ( MRNA.O ) rose 3.6% after reporting data showing the effectiveness of the respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc ( PNC.N ) fell 5.4% after the company missed estimates for fourth-quarter profit.

Falling issues outnumbered departures on the NYSE by a ratio of 1.38 to 1; on the Nasdaq a 1.66 to 1 ratio favored decliners.

S&P 500 posted 9 new 52-week highs and 2 new lows; The Nasdaq Composite registered 71 new highs and 14 new lows.

Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio

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