Topline
The stock market moved lower once again on Monday—following a sharp selloff on Friday in which the Dow plunged 1,000 points—as investors continue to worry about ongoing interest rate hikes and tighter monetary policy from the Federal Reserve potentially throwing the economy into a recession.
Key Facts
The Dow Jones Industrial Average was down 0.4%, over 100 points, while the S&P 500 lost 0.5% and the tech-heavy Nasdaq Composite 0.9%.
Stocks added to steep losses on Friday, when the Dow plunged 1,000 points after Federal Reserve chair Jerome Powell said in his Jackson Hole speech the central bank will continue to aggressively hike rates and it would take “some time” to achieve price stability.
Powell’s speech also further squashed investor hopes about a potential Fed pivot, with the central bank unlikely to scale back its aggressive rate hike campaign anytime soon despite cooling inflation last month.
Traders are now pricing in a third consecutive increase of 75 basis points at the Fed’s upcoming policy meeting in September, rather than a smaller 50 basis point rate hike, according to CME Group data.
Tech stocks led the market declines as treasury yields rose again on Monday, with the likes of Apple falling more than 1% while chipmaker stocks like AMD and Nvidia each lost over 2%.
Following Powell’s speech on Friday, there is a rising risk the Fed could “overtighten” by hiking rates too much and throwing the economy into a recession, several experts including Wharton professor Jeremy Siegel told CNBC on Monday.
Crucial Quote:
“Market sentiment is about as negative as it was in June and early July following an avalanche of hawkish articles and headlines exiting the Jackson Hole conference,” says Vital Knowledge founder Adam Crisafulli. Powell’s speech wasn’t “nearly as bad” as it’s being made out to be for markets, especially since the Fed could be nearing the end stages of its rate-hiking campaign by September, he predicts.
Tangent:
The price of cryptocurrency Bitcoin dropped below $20,000 on Monday, hitting its lowest point since mid-July, according to data from Coin Metrics. Other cryptocurrencies also moved lower, with the price of ether falling to just over $1,400 for its lowest level in a month.
Key Background:
Despite a brutal selloff in the first half of the year, stocks have rebounded this summer, largely thanks to hopes that inflation may have finally peaked. After falling into a bear market in June, the S&P 500 was at one point down 23% for the year, though the index has pared back losses and is now down over 15%. Wall Street experts have continued to warn that gains this summer have been a “textbook” bear market rally, which now appears to be fizzling out—with stocks likely to hit new lows amid ongoing recession fears.
Further Reading:
Here’s Why The Fed’s Jackson Hole Symposium Isn’t A Big Deal For Investors (Forbes)
Dow Falls Over 600 Points As Experts Warn Bear Market Rally Is ‘Grinding To A Halt’ (Forbes)
Netflix Is Now The Worst-Performing Stock In The S&P 500 As Shares Plunge Over 60% In 2022 (Forbes)