NEW YORK: US stocks ended with losses again on Wednesday (Aug 31), part of a downward trend set in motion by Federal Reserve (Fed) chief Jerome Powell, who last week warned there would be no respite from interest rate increases.
Cleveland Federal Reserve president Loretta Mester echoed Powell’s sentiments on Wednesday, stating that she sees the Fed raising interest rates above 4% by early next year during a speech in Dayton, Ohio.
“All (Powell) cares about is getting inflation down and raising rates to do that, and in terms of how aggressive to be that is all to be determined from the data,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, New York.
“Right now we are in this flip back-and-forth market, a lot of volatility, concerns the rally we did have was just a bear market rally, probably some concern we will go back down to new lows.”
In the meantime, investors are looking ahead to jobs data, particularly today's (Sept 1) all-important government employment report.
“We just had a quiet start to the week in data. And starting tomorrow (Thursday) and Friday, I think we’ll have a lot more information to digest,” said Jack Ablin of Cresset Capital.
New data on Wednesday from payroll firm ADP showed American employers ratcheted back their hiring in August – private jobs increased by 132,000 in the month, less than half the pace of July.
The report could be good news for the Fed as it battles surging prices, amid fears the strong labour market will cause a wage spiral and higher inflation.
The Dow Jones Industrial Average fell 280.44 points, or 0.88%, to 31,510.43; the S&P 500 lost 31.16 points, or 0.78%, to 3,955; and the Nasdaq Composite dropped 66.93 points, or 0.56%, to 11,816.20.
The three main indices 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, dropping more than 8% through Wednesday’s close and falling through several closely watched technical support levels.
For the month, the Dow fell 4.06%, the S&P 500 lost 4.24% and the Nasdaq declined 4.64%.
Adding to investor nervousness, stocks are also heading into a historically weak period for the market in September.
“September is usually the worst month of the year; it and February are the only ones to post average declines, but September is the only month of the year to fall more than it rises so it could end up being sort of a self-fulfilling prophecy,” said Sam Stovall, chief investment strategist at CFRA in New York.
In individual stocks, Snapchat parent Snap was up 8.7% after the company confirmed it is cutting 20% of staff in an effort to restructure priorities.
HP Inc fell 7.68% after it forecast downbeat quarterly and full-year profit on slowing PC sales. – AFP, Reuters