U.S. stocks were lower early Monday morning as investors expressed concern about future Fed action.
Traders worry aggressive rate hikes this year by the Fed and central banks in Europe and Asia to contain inflation that is running at multi-decade highs might derail global economic growth.
“The Fed is still feeling inflation. Its actions have not even begun to dent inflationary pressures at all,” said Clifford Bennett of ACY Securities in a report. “Nor have they begun to crimp economic activity at all. The economic slowdown was already in play for other reasons.”
U.S. stocks fell Friday, ending the week lower and snapping a four-week stretch of gains for the S&P 500, as investors second-guessed how aggressively the Federal Reserve will need to move to tame inflation.
The market endured a stretch of choppy moves as traders reassessed their bets on what the Fed might do at its September meeting. For weeks, many investors had been feeling confident that inflation had possibly peaked and that the central bank would soften the magnitude of its future interest-rate increases.
But comments in recent days from central bank officials, combined with the release of the minutes from the Fed’s July meeting, put the possibility of continued aggressive rate increases back in focus.
On Thursday, Federal Reserve Bank of St. Louis President James Bullard said he would lean toward a 0.75-percentage-point increase in September.
“This feels like a re-evaluation of whether there has been enough financial tightening,” said John Roe, head of multi-asset funds at Legal & General Investment Management. “And if there hasn’t actually, could we get more pain from central banks having to do more?”
The S&P 500 dropped 55.26 points, or 1.3%, to 4228.48 and fell 1.2% for the week. The Dow Jones Industrial Average fell 292.30 points, or 0.9%, to 33706.74 and lost 0.2% for the week. The Nasdaq Composite declined 260.13 points, or 2%, to 12705.22 and fell 2.6% for the week.
Technology stocks had some of the biggest losses. Microsoft fell 1.4%.
Retailers, banks and communications companies also fell. Next week, central bankers will meet in Jackson Hole, Wyo., for the Federal Reserve Bank of Kansas City’s annual economic policy symposium.
Traders will be watching officials’ speeches closely for insights on how the Fed is thinking.
Meanwhile, Shanghai advanced after the Chinese central bank nudged down its target rate for a five-year loan to shore up weak housing sales. Tokyo, Hong Kong, Seoul and Sydney retreated.
The Shanghai Composite Index rose 0.5% to 3,272.89 while the Nikkei 225 in Tokyo sank 0.5% to 28,794.79. The Hang Seng in Hong Kong shed less than 0.2% to 19,743.12. The Kospi in South Korea gave up 1.2% to 2,462.03 and Sydney’s S&P ASX-200 fell 0.9% to 7,051.70. India’s Sensex opened down 1.1%, dipping to 58,992.24. New Zealand and Singapore advanced while Bangkok and Jakarta declined.