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Wall Street ends August with a whimper over Fed concerns

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  • Snap jumps as it restructures ad business, lays off employees
  • Bed Bath & Beyond sinks corporate overhaul
  • Biggest fall in August for Dow, S&P 500, Nasdaq since 2015
  • Dow down 0.88%, S&P 500 down 0.78%, Nasdaq down 0.56%

NEW YORK, Aug 31 (Reuters) – U.S. stocks ended the month with their fourth straight daily decline on Wednesday, cementing their weakest August performance in seven years as concerns about aggressive rate hikes by the Federal Reserve persisted.

Adding to the pressure was declines in the technology sector ( .SPLRCT ), and more specifically chipmakers ( .SOX ), after soft forecasts from Seagate ( STX.O ) and HP Inc.

The three major indexes suffered their biggest monthly percentage declines in August since 2015. After hitting a four-month high in mid-August, the S&P 500 has stumbled in recent weeks, falling more than 8% through Wednesday’s close and falling through several closely watched technical support levels.

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Selling pressure accelerated after Fed Chairman Jerome Powell’s hawkish comments on Friday about keeping monetary policy tight “for a while” dashed hopes for more modest rate hikes, with the benchmark down more than 5% over the past four trading sessions.

“All (Powell) cares about is getting inflation down and raising interest rates to do that, and in terms of how aggressive to be, that has to be determined based on the data,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, New York.

“Right now we’re in this flip-back market, a lot of volatility, concerns that the rally we had was just a bear market rally, probably a concern that we’ll go back to new lows.”

Cleveland Federal Reserve Bank President Loretta Mester said Wednesday that the central bank will need to raise interest rates somewhat above 4% early next year and keep them there to bring inflation back to the Fed’s target, and that the risk of a recession over the next year or two has moved up. read more

The Dow Jones Industrial Average (.DJI) fell 280.44 points, or 0.88%, to 31,510.43; The S&P 500 (.SPX) lost 31.16 points, or 0.78%, to 3,955; and the Nasdaq Composite (.IXIC) fell 66.93 points, or 0.56%, to 11,816.20.

For the month, the Dow fell 4.06%, the S&P 500 lost 4.24% and the Nasdaq fell 4.64%.

To increase investor nervousness, stocks are also heading into a historically weak period for the market in September.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 22, 2022. REUTERS/Brendan McDermid

“September is usually the worst month of the year; it and February are the only ones with average declines, but September is the only month of the year that falls more than it rises, so it could end up being a kind of self-fulfilling prophecy,” said Sam Stovall, investment strategist at CFRA in New York.

Data earlier in the day showed ADP private payrolls rose by 132,000 jobs in August, which was lower than economists’ forecast for job growth of 288,000, according to a Reuters poll. However, the report was suspended in June and July when the methodology was overhauled after a poor track record of being in sync with the government’s wage report. read more

The Labor Department jobs data is due on Friday and is expected to show that non-farm payrolls rose by 300,000 last month after registering an increase of 528,000 in July. Another strong report will probably further cement expectations that the Fed will continue with large interest rate increases after three straight increases of 75 basis points.

The Philadelphia SE semiconductor index (.SOX) lost 1.15% after Seagate, down 3.54%, cut its first-quarter expectations, citing macroeconomic concerns that are forcing cloud companies and PC makers to cut inventory levels. read more

In addition, HP Inc fell 7.68% after it forecast lower quarterly and full-year earnings on slowing PC sales.

Snap Inc ( SNAP.N ) rose 8.69% after saying it will cut 20% of its staff, restructure its ad sales unit and shut down some projects to focus on improving sales and the number of Snapchat users. read more

Chewy Inc fell 8.18% after the online pet supplies retailer cut its full-year 2022 sales outlook.

Bed Bath & Beyond Inc ( BBBY.O ) plunged 21.30% after saying it would close 150 stores, cut jobs and overhaul its merchandising strategy in a bid to turn around its money-losing business. read more

Declining issues outnumbered advancing ones on the NYSE by a ratio of 2.44 to 1; on the Nasdaq a 1.32 to 1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 14 new lows; The Nasdaq Composite registered 16 new highs and 190 new lows.

Volume on US exchanges was 11.16 billion shares, compared to the 10.52 billion average for the full session over the past 20 trading days.

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Reporting by Chuck Mikolajczak; editing by Jonathan Oatis

Our standards: Thomson Reuters Trust Principles.

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