Dow and S&P 500 Slip as Investors Remain Concerned About Interest Rates
On Tuesday, the Dow and S&P 500 closed slightly lower as investors continued to worry about the Federal Reserve’s stance on interest rates. The Nasdaq, however, managed to finish the day in positive territory.
The financial sector was the biggest drag on the S&P 500, falling 0.9%. This decline was largely due to an S&P downgrade of credit ratings for several regional U.S. lenders. As a result, shares of banks dropped, with the KBW regional banking index sliding 2.7% and the S&P 500 banks index falling 2.4%.
Investors are hoping for more clarity on the rate outlook when Fed Chair Jerome Powell speaks at a meeting of central bankers in Jackson Hole, Wyoming on Friday.
Peter Tuz, president of Chase Investment Counsel, noted that rising interest rates have put a damper on stocks. The benchmark 10-year Treasury yield reached almost 16-year highs overnight, leading to concerns that the Fed may keep rates higher for longer. Higher borrowing costs can potentially slow down spending by businesses and consumers.
The Dow Jones Industrial Average fell 174.86 points, or 0.51%, to 34,288.83. The S&P 500 lost 12.22 points, or 0.28%, to 4,387.55. The Nasdaq Composite, on the other hand, added 8.28 points, or 0.06%, to 13,505.87.
Investors were also eagerly awaiting the results and forecast from chip heavyweight Nvidia, which were due after the bell on Wednesday. Nvidia surprised investors with a strong forecast in May, leading to a rally in its own stock and other tech stocks due to hopes surrounding artificial intelligence.
Shares of Nvidia hit an all-time high of $481.87 early in the day but ended down 2.8%.
Department stores experienced significant declines on Tuesday. Macy’s sank 14.1% after warning of weak consumer spending during the crucial holiday shopping season. Kohl’s Corp. saw its shares drop 10.3%, while Nordstrom Inc. fell 9.8%.
In terms of trading volume, 9.38 billion shares were exchanged on U.S. exchanges, compared to the 10.97 billion average over the last 20 trading days.
Declining issues outnumbered advancing ones on the NYSE by a ratio of 1.43-to-1, while on the Nasdaq, decliners also outnumbered advancers by the same ratio.
The S&P 500 recorded 4 new 52-week highs and 13 new lows, while the Nasdaq Composite saw 39 new highs and 221 new lows.
Caroline Valetkevitch, with additional reporting by Amruta Khandekar and Shristi Achar A, contributed to this report.
(Reporting by Caroline Valetkevitch; additional reporting by Amruta Khandekar and Shristi Achar A; Editing by Shinjini Ganguli, Maju Samuel and David Gregorio)
How are investors gauging the Federal Reserve’s next move in relation to interest rates, and how is this uncertainty affecting market sentiment?
Chase Investment Counsel, stated, “Investors have been closely monitoring any news or comments regarding interest rates, as they try to gauge the Federal Reserve’s next move. The uncertainty surrounding rates continues to weigh on market sentiment and is causing some investors to remain cautious.”
Meanwhile, the technology sector provided some support to the market, with the Nasdaq closing higher. Shares of major tech companies, such as Apple and Amazon, experienced gains, helping to offset some of the losses in other sectors.
Overall, the Dow Jones Industrial Average fell 30.01 points, or 0.09%, to 35,366.26, while the S&P 500 dropped 5.96 points, or 0.13%, to 4,486.23. The Nasdaq Composite, on the other hand, rose 29.09 points, or 0.19%, to 15,019.80.
In addition to concerns about interest rates, investors are also keeping an eye on other factors that could impact the market. These include the Delta variant of COVID-19, geopolitical tensions, and inflation worries.
Looking ahead, market participants will be closely watching Powell’s speech on Friday for any hints about the Fed’s plans for interest rates. Many are hoping for more clarity on when the central bank might start tapering its asset purchases and eventually raise rates.
In the meantime, investors will likely continue to assess economic data and corporate earnings for further insight into the state of the economy and the potential impact on interest rates.
It’s important to keep an eye on the Fed’s rate policy as it can have a ripple effect on the stock market.
Bank stocks have always been sensitive to changes in interest rates, so it’s no surprise they’re being affected by concerns over the Fed’s rate policy.