S&P sees biggest drop since June
The benchmark index fell 2.1%, its sharpest daily decline since June 16. The tech-heavy Nasdaq composite dropped 2.5%, nearly erasing its gains for August
Stocks on Wall Street slid Monday, with the S&P 500 dropping by the most it has in more than two months, as a speech this week by Federal Reserve Chair Jerome Powell loomed over investors who are focused on the path for interest rates in the months ahead.
The benchmark index fell 2.1%, its sharpest daily decline since June 16. The tech-heavy Nasdaq composite dropped 2.5%, nearly erasing its gains for August.
The sudden swing shows that investors recognize they are still not out of the woods when it comes to the Federal Reserve, recalling the sting of soaring inflation and a series of large interest rate increases by the Fed this year that helped push stock prices sharply lower. The inflation reading for July, which showed that gains in consumer prices steadied from the month before, had spurred hopes that the central bank might ease its campaign to raise borrowing costs.It has dawned on investors that such a conclusion was premature, said Victoria Greene, chief investment officer at G Squared Private Wealth.
“People are coming back to reality that the world is still a very uncertain place,” she said.
A speech by Powell on Friday, at a gathering of central bankers in Jackson Hole, Wyoming, could help clarify the Fed’s expectations for inflation. Economists will listen for clues on whether the Fed will make another three-quarter-point increase in interest rates at its September meeting or go with a half-point increase.
Monday’s trading reflected worries that policymakers might choose the more aggressive approach.
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“The concern is that the Fed is now going to go out of their way to remind people that they’re still going to hike rates,” Greene said.
The pessimistic mood Monday affected other markets, too. Yields on government bonds rose, with the yield on 10-year Treasury notes climbing above 3% for the first time since July 20. The yield on 2-year notes jumped to 3.32%.