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U.S. stocks opened lower Monday, extending losses after ending last week with a rout after Federal Reserve Chairman Jerome Powell underlined policy makers’ resolve to squeeze out inflation even if it results in economic pain.
What’s happening
-
The Dow Jones Industrial Average
DJIA,
-0.47%
fell 236 points, or 0.7%, to 32,046. -
The S&P 500
SPX,
-0.28%
was down 22 points, or 0.6%, at 4,035. -
The Nasdaq Composite
COMP,
-0.26%
shed 55 points, or 0.5%, to trade at 12,086.
Stocks recorded their worst day in months on Friday, when the Dow industrials tumbled 1,008.38 points, or 3%, to close at 32,283.40, its biggest percentage decline since May 18. The S&P 500 slid 3.4%, its biggest drop since June 13, and the Nasdaq Composite
COMP,
tumbled 3.9%, the largest drop since June 16.
What’s driving markets?
Both bonds and stocks appear to have been shaken by Powell, who made blunt comments about the central bank’s commitment to bringing down high inflation on Friday during a speech at the Kansas City Fed’s annual symposium at Jackson Hole, Wyo.
See: Fed’s Powell sparked a 1,000-point rout in the Dow. Here’s what investors should do next.
Powell said the Fed would continue the fight even if it means pain for American families and businesses. His comments seemed to dash investor notions of a coming “pivot” away from aggressive rate increases.
“Stocks had a reasonable shot at a second-straight up week last Thursday, but the bearish reaction to Powell’s Jackson Hole speech pushed the market decisively into the red. Friday’s selloff also pushed the SPX below its pullback lows from earlier in the week — what some traders may see as a failure of the market’s test of its early-August breakout level,” said Chris Larkin, managing director of trading at E-Trade from Morgan Stanley, in emailed comments.
Powell also mentioned a resilient jobs market, suggesting that he is willing to allow unemployment to climb, noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note to clients.
That means another strong print on the state of jobs growth in August could help strengthen the Fed’s resolve.
“Due Friday, the NFP data is expected to print another month close to 300,000 new nonfarm job additions in the U.S. Over the past four months, the data clearly exceeded the market expectations, especially last month, the number printed was above half-a-million new job additions, versus around 250,000 expected by analysts,” said Ozkardeskaya.
Even if the data were to come in short of economists’ expectations, investors shouldn’t expect to see any change in the Fed’s outlook. Instead, “from now on, we expect to see a deeper downside correction in equities, and further retracement of the summer rally.”
As the selloff in bonds gathered pace, the 2-year Treasury
TMUBMUSD02Y,
yield was up 2.5 basis points near 3.429%, after hitting a level not seen since November 2007, according to FactSet.
Companies in focus
-
Tesla Inc.
TSLA,
-0.84%
Chief Executive Elon Musk said Monday he is aiming to get the electric-vehicle maker’s self-driving technology ready by year-end, and said he hopes it could quickly be in wide release in the U.S. and even Europe depending on regulatory approval, Reuters reported. Shares fell 0.3%.
Other assets
- The ICE U.S. Dollar Index DXY edged down 0.1% after an early rise.
-
Oil futures moved higher, with the U.S. benchmark
CL.1,
+3.04%
up more than 2% near $95.25 a barrel, while gold
GC00,
+0.43%
ticked up 0.1% to $1,751.40 an ounce. -
Bitcoin
BTCUSD,
+1.82%
rose 2.3% to edge back above $20,000. -
The Stoxx Europe 600
SXXP,
-0.79%
was down 0.9%, while London markets were closed for the summer bank holiday. -
The Shanghai Composite
SHCOMP,
+0.14%
ended 0.1% higher, while the Hang Seng Index
HSI,
-0.73%
fell 0.7% in Hong Kong and Japan’s Nikkei 225
NIK,
-2.66%
dropped 2.7%.
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.
