Wall Street extends selling as Powell hints at further rate hikes

NEW YORK, June 21 (Reuters) – U.S. stocks closed lower on Wednesday as Federal Reserve Chairman Jerome Powell’s congressional testimony reinforced the central bank’s aim to curb inflation as he hinted at the likelihood of further rate hikes.

All three major U.S. stock indexes posted their third consecutive daily decline, with megacap tech and tech-related stocks weighing the most.

“The market seems to be taking a breather after a tremendous start to the month,” said Ryan Detrick, market strategist at the Carson Group in Omaha. “Historically, June isn’t a very strong month for stocks, but this year could go down as one of the strongest Junes ever, so a little break in the stock price is perfectly normal.”

Tesla Inc ( TSLA.O ), along with AI-related stocks such as Microsoft Corp ( MSFT.O ) and Nvidia Corp ( NVDA.O ) were the heaviest drags.

In his testimony before the US House Financial Services Committee, Powell reiterated the fact that the central bank remains “strongly committed to bringing inflation back to our 2% target,” and said it would be “a pretty good guess” that future rate hikes are in the cards if the economy continues on its current path.

“Two walks, which is what the dot plot told us,” Detrick said. “There could be one more rate hike, but I don’t think anyone is buying the fact that there will be two. The markets are assuming the Fed is very close to being done.”

At last glance, financial markets have priced in a 74.4% probability of another 25 basis point rate hike at the conclusion of July’s monetary policy meeting, according to CME’s FedWatch tool.

Powell is scheduled to testify before the Senate Banking Committee on Thursday.

The Dow Jones Industrial Average (.DJI) fell 102.35 points, or 0.3%, to 33,951.52, the S&P 500 (.SPX) lost 23.02 points, or 0.52%, to 4,365.69 and Nasdaq Composite (.16.1 or 165 points). 1.21% to 13,502.20.

Among the 11 major sectors in the S&P 500, energy stocks ( .SPNY ) led gains, recovering from their biggest daily plunge in more than a month. Technology (.SPLRCT) and communications services (.SPLRCL) had the biggest percentage declines.

Chips weighed heavily on tech stocks. The Philadelphia SE Semiconductor Index (.SOX) fell 2.7%, its biggest daily decline this month.

Tesla Inc was the biggest drag on the S&P 500 and Nasdaq, falling 5.5%. Barclays downgraded its rating on the stock to “equal weight” from “overweight”, saying the electric car maker’s recent rally was too sharp relative to fundamentals.

“A big part of today’s weakness is because Tesla had one of its worst days in a while,” Detrick added. “It is a share that should also be breathed into the ground.”

“After a record winning streak, some sort of weakness is perfectly acceptable and normal.”

Package delivery firms FedEx ( FDX.N ) and United Parcel Service Inc ( UPS.N ) fell 2.5% and 2.1% respectively, after FedEx posted disappointing quarterly results and said slowing global demand is squeezing profit margins.

Crypto firms including Coinbase (COIN.O), Riot Platforms (RIOT.O), Marathon Digital (MARA.O) and Bit Digital (BTBT.O) rose between 1.8% and 4.2% as Bitcoin hit $30 000 level.

Falling issues outnumbered advancing ones on the NYSE by a ratio of 1.04 to 1; on the Nasdaq, a 1.42 to 1 ratio favored decliners.

S&P 500 posted 16 new 52-week highs and no new lows; The Nasdaq Composite recorded 80 new highs and 123 new lows.

Volume on US exchanges was 10.62 billion shares, compared to the 11.41 billion average for the full session over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Shubham Batra, Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Aurora Ellis

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