Nasdaq falls over 2% after Powell’s speech sparks tech rout

Merchants work on the ground of the New York Inventory Change (NYSE) in New York Metropolis, U.S., August 15, 2022. REUTERS/Brendan McDermid/File Picture

Aug 26 (Reuters) – The Nasdaq led Wall Avenue sharply decrease on Friday after Federal Reserve Chief Jerome Powell signaled the central financial institution would preserve elevating rates of interest to tame inflation, sparking a selloff in progress and know-how shares.

The U.S. financial system will want tight financial coverage “for a while” earlier than inflation is beneath management, Powell mentioned in a speech to the Jackson Gap central banking convention in Wyoming.

Meaning slower progress, a weaker job market and “some ache” for households and companies, he added. learn extra

“His feedback have been hawkish, he is maintaining the pedal to the steel right here in terms of coverage to battle inflation,” mentioned Lindsey Bell, chief cash and markets strategist at Ally.

All of the 11 main S&P 500 sectors have been decrease in mid-day buying and selling, with data know-how (.SPLRCT), communication providers (.SPLRCL) and client discretionary (.SPLRCD) shares down between 2.5% and three.1%.

Weighing on megacap progress and know-how shares, the U.S. two-year Treasury yields briefly popped to their highest ranges since October 2007 earlier than stabilizing close to two-month highs.

Excessive-growth and know-how shares comparable to Nvidia Corp (NVDA.O) and Amazon.com Inc declined 6.0% and three.2%, respectively, after posting sharp positive factors within the earlier session.

Financial system-sensitive banks (.SPXBK) fell 1.9%.

“The market is reacting fairly negatively as a result of in case you take a look at expectations for the place fed funds price go this yr and subsequent yr, the market was anticipating that the Fed backs off within the subsequent yr and nothing that Powell mentioned suggests that might be the case,” mentioned Bell.

U.S. inventory indexes have retreated because the flip of the yr as buyers priced within the expectation of aggressive rate of interest hikes and a slowing financial system.

However they’ve recovered strongly since June, with the S&P 500 recouping practically half its losses for the yr on stronger-than-expected quarterly earnings and hopes inflation has peaked.

Merchants have been nonetheless divided between a 75-basis-point and a 50-basis-point hike by the Fed, whereas economists see the central financial institution lifting charges by 50 foundation factors at its assembly subsequent month.

At 11:45 a.m. ET, the Dow Jones Industrial Common (.DJI) was down 568.91 factors, or 1.71%, at 32,722.87, the S&P 500 (.SPX) was down 86.30 factors, or 2.06%, at 4,112.82, and the Nasdaq Composite (.IXIC) was down 330.25 factors, or 2.61%, at 12,309.02.

Knowledge earlier confirmed client spending barely rose in July, however inflation eased significantly, which may give the Fed room to cut back its aggressive rate of interest will increase. learn extra

Dell Applied sciences Inc (DELL.N) fell 11.9% because it joined rivals in predicting a slowdown as runaway inflation and the darkening financial outlook immediate shoppers and companies to tighten their purse strings. learn extra

Affirm Holdings Inc (AFRM.O) tumbled 20.7% after the buy-now-pay-later lender forecast full-year income under Wall Avenue estimates, underscoring the broader downturn within the fortunes of the as soon as high-flying fintech sector.

Declining points outnumbered advancers for a 5.65-to-1 ratio on the NYSE and a 4.74-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 32 new lows, whereas the Nasdaq recorded 24 new highs and 92 new lows.

Reporting by Bansari Mayur Kamdar, Devik Jain, Anisha Sircar and Sruthi Shankar in Bengaluru; Enhancing by Maju Samuel and Aditya Soni

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