Market Snapshot: Dow closes down over 150 points as blue-chip gauge posts longest losing streak in a month

What’s driving markets?

Market strategists blamed the three-day losing streak in U.S. stocks on a number of factors, including nerves ahead of Federal Reserve Chairman Jerome Powell’s speech on Friday, combined with a drumbeat of downbeat economic news, along with anxieties about rising Treasury yields and a stronger U.S. dollar.

“There’s a multitude of smaller reasons, rather than one obvious one,” said Steve Sosnick, chief strategist at Interactive Brokers.

Following Tuesday’s selloff, which comes on the heels of the steepest decline for stocks in two months on Monday, the S&P 500 has now fallen 2.4% since Friday’s close while the yield on the 10-year Treasury note
TMUBMUSD10Y,
3.048%
has steadied above 3% and the U.S. dollar has moved back into parity with the euro
EURUSD,
+0.02%.

As analysts wait to hear from Powell on Friday, many are blaming the rise in bond yields and the greenback on the realization that he could put an end to the market’s optimism about the pace of Federal Reserve interest-rate hikes, which have long been an issue of paramount importance for markets.

Fed funds futures, a closely watched indicator of expectations surrounding the pace of the Fed’s interest-rate hikes, now see greater than 50% odds of a 75 basis-point hike from the Fed when it meets in September. Just one week ago, derivatives traders favored odds of a 50 basis point hike.

“There is perhaps a growing realization that the Federal Reserve will remain unmoved by recent data which suggested that inflation could be peaking and maintain its aggressive policy,” said Richard Hunter, head of markets at Interactive Investors.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said investors had become more wary that Chairman Jay Powell will seek to cement his hawkish stance when he addresses the public from Jackson Hole, Wyo. on Friday, the highlight of the Fed’s annual economic symposium in the Tetons.

“Now that the Jackson Hole meeting approaches, those [bullish stock market] bets are vanishing, as there is no way the Fed will soften its tone while inflation still hangs around the 8.5% level,” Ozkardeskaya said in a morning note.

See: Beware of a ‘bear trap’ retreat in stocks after the big summer rally, strategists warn

In U.S. economic data, the S&P Global U.S. flash manufacturing purchasing managers index (PMI) fell to 51.3 in August from 52.2 in July, a 25 month low, while the services sector PMI fell to 44.1 in August from 47.3 in July, a 27-month low.

See: U.S. economy slows again, S&P finds, due to high inflation and rising interest rates

Meanwhile, U.S. new home sales plunged 12.6% to a seasonally-adjusted rate of 511,000 in July, from a revised 585,000 in the prior month, the Commerce Department reported Tuesday. Analysts polled by the Wall Street Journal had forecast new home sales to come in at 574,000 in July.

Which companies were in focus?

• Shares of Zoom Video Communications Inc.
  ZM,
  -16.54%
  slumped 16.5% after the company indicated challenges in its core business, which are related to the strong U.S. dollar and subscription growth in Zoom’s online channel, which is made up of customers who don’t engage with Zoom’s direct sales team or sales partners.

• Palo Alto Networks Inc.
  PANW,
  +12.10%
  shares surged 12.1% after the cybersecurity company said its forecast topped Wall Street estimates.

• Macy’s Inc.
  M,
  +3.76%
  shares jumped 3.8% after the department store chain posted better-than-expected earnings for the second quarter, although it lowered its full-year guidance to reflect a difficult spending environment and high levels of inventory.  Macy’s reported adjusted earnings of $1 on revenue of $5.6 billion.

How did other assets fare?

• West Texas Intermediate crude for October delivery  
  CLV22,
  +3.77%
   advanced $3.32, or 3.7%, to $93.68 per barrel on the New York Mercantile Exchange. Meanwhile, U.S. natural-gas prices traded at a 14-year high as a European energy crisis looms.

• The yield on the 10-year Treasuryrose 1.8 basis points to 3.053% from 3.035% on Monday afternoon after hitting its highest level in six weeks.

• Gold futures
  GCZ22,
  +0.73%
  for December delivery climbed $12.80, or 0.7%, to settle at $1,761.20 per ounce on Comex, following six session losses in a row for the most-active contract.

• Bitcoin
  BTCUSD,
  +0.21%
  advanced 0.9% to $21,541.

• Asia markets fell back in tandem with Wall Street’s overnight decline. Japan’s Nikkei 225
  NIK,
  -1.19%
  finished 1.2% lower and Hong Kong’s Hang Seng
  HSI,
  -0.78%
  shed 0.8%. In Europe, the Stoxx 600
  SXXP,
  -0.42%
  recovered much of its early losses to trade down 0.1%.

Hear from Carl Icahn at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The legendary trader will reveal his view on this year’s wild market ride.