Stocks post another loss as markets fret over rising rates

Stocks deepened their late-August skid with more losses today as Wall Street grapples with the prospect that high interest rates are here to stay until the Federal Reserve lowers the inflation.

The S&P 500 fell 1.1%, bringing its loss over the past three days to 5.1%. The benchmark is down 3.5% for the month with one day remaining in August.

The Dow Jones Industrial Average fell 1%, while the Nasdaq composite lost 1.1%. Smaller company stocks also fell, dragging the Russell 2000 down 1.5%.

Markets have been weaker since Federal Reserve Chairman Jerome Powell indicated on Friday that the central bank would stick to its strategy of raising interest rates in an attempt to rein in the highest inflation in four decades.

The latest wave of selling reflects a “hangover” from Powell’s speech last week and uncertainty ahead of the Labor Department’s monthly jobs report on Friday, said Megan Horneman, chief investment officer at Verdence Capital Advisors.

Markets are trying to get a better idea of ​​”how far, how fast the Fed will have to go” to slow the economy to fight inflation, she said.

A strong labor market report this morning further dampened any hopes that the Fed would be able to ease its inflation-fighting policy. The higher rates imposed by the Fed aim to contain inflation by slowing the economy, including the pace of hiring.

The government said there were 11.2 million jobs open on the last day of July. That’s nearly two jobs for every unemployed person, on average. That number was up from 11 million in June, and the June figure was also revised upwards.

“Employers will need to increase their incentives to fill jobs, which could be inflationary,” said Sam Stovall, chief investment strategist at CFRA. “We don’t see numbers that consistently offer encouragement.”

Wall Street fears that the Fed is putting the brakes on an already slowing economy too hard and pushing it into a recession. Rising interest rates also hurt investment prices, especially for more expensive stocks.

The central bank has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its next meeting in September, according to CME Group.

The selloff was widespread today, with all sectors of the S&P 500 ending in the red. In total, the S&P 500 fell 44.45 points to 3,986.16. The Dow Jones lost 308.12 points to 31,790.87 and the Nasdaq fell 134.53 points to 11,883.14. The Russell 2000 fell 27.35 points to close at 1,855.59.

Major indices had gained ground in July and early August on hopes that weaker economic data would prompt the Fed to ease its high interest rate policy. The gains followed a weak first half where the S&P 500 fell 20% from its most recent peak and entered a bear market.

Investors are watching economic data closely for any further signs of the economy slowing down or inflation slowing or at least staying at its current level. Businesses and consumers have been hit hard by rising prices for everything from food to clothing, but recent drops in gasoline prices have brought some relief.

Consumers regained some confidence in August, according to a Conference Board survey. Its consumer confidence index rose this month after three consecutive monthly declines. It also rose well above what economists expected.

Tech stocks were among the largest weightings in the index today. Chipmaker Nvidia fell 2.1%.

Energy stocks fell along with US crude oil prices, which fell 5.5% to $91.64 a barrel. Chevron fell 2.4%.

While the price of US crude has risen more than 43% this year, it has fallen nearly 5% this month.

“The biggest challenge with oil is the fact that the Fed basically said they were going to produce economic hardship to try to bring inflation down, and generally when you have an economic downturn or a recession you’re going to get energy prices falling,” said Horneman.

Best Buy was a bright spot, gaining 1.6% after reporting results for its latest quarter that were much better than analysts expected.

The 10-year Treasury yield remained stable at 3.11%.