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Nasdaq, S&P 500 retreat as rate hike fears cool stock rally

Economy Aug 11, 2022 07:21PM ET
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© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 8, 2022. REUTERS/Andrew Kelly
 
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By Herbert Lash and Bansari Mayur Kamdar

NEW YORK (Reuters) -The Nasdaq and S&P 500 retreated to close lower on Thursday on the realization the Federal Reserve still needs to aggressively boost interest rates to fully tame rising consumer prices despite fresh evidence of cooling inflation.

The S&P 500 closed a tad lower after earlier hitting fresh three-month highs following data that showed the U.S. producer price index (PPI) unexpectedly fell in July.

The drop in PPI raised bets in futures markets that the Fed would hike rates by 50 basis points in September instead of 75 basis points as was expected earlier in the week.

The S&P 500 and Nasdaq surged more than 2% on Wednesday after a softer-than-expected read on consumer prices. But policy-makers have left little doubt they will tighten monetary policy until inflation pressures fully abate.

With the labor market showing signs of softness as the number of Americans filing new claims for unemployment benefits rose for the second straight week, the Nasdaq turned lower as investors questioned the economy's strength.

"It was a better CPI print yesterday than expected and a better PPI print this morning than forecasted by analysts. So it fit that theme, that peak inflation has occurred as energy continues to decline," said George Catrambone, head of Americas trading at DWS Group. "But I would be concerned about a head fake."

The Dow Jones Industrial Average rose 27.16 points, or 0.08%, to 33,336.67, while the S&P 500 slid 2.97 points, or 0.07%, to 4,207.27 and the Nasdaq Composite dropped 74.89 points, or 0.58%, to 12,779.91.

Volume on U.S. exchanges was 12.36 billion shares, compared with the 11.06 billion average for the full session over the past 20 trading days.

Six of the 11 major S&P 500 sectors declined, with health care leading. Energy rose 3.2% to lead gainers and help value stocks advance 0.4% as growth shares fell 0.5%.

Banks extended their rally with Goldman Sachs (NYSE:GS) and JPMorgan Chase & Co (NYSE:JPM) rising 1.1% and 1.5%, respectively.

Benchmark U.S. Treasury yields hit more than two-week highs as bond investors bet the Fed will press on with hiking rates as inflation is still hot, even though price pressures have eased a bit. [US/]

Demand, as seen by an almost 9% increase in aggregate spending power, is still too strong and may lead the Fed to stay aggressive longer than many hope, said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions.

"We're becoming a little more worried because the Fed might have to do a little bit more work to try to cool that excess demand side of the equation," Janasiewicz said.

High-growth stocks that had rallied on Wednesday fell, Tesla (NASDAQ:TSLA) Inc down 2.6% and Amazon.com Inc (NASDAQ:AMZN) off 1.5%.

Despite its recent bounce of mid-June lows, the tech-heavy Nasdaq is down about 18% so far this year as fears of an aggressive monetary policy have sapped appetite for equities, particularly high-growth stocks.

The U.S. central bank has raised its policy rate by 225 basis points since March as it battles to cool demand without sparking a sharp rise in layoffs.

In earnings-driven news, Walt Disney (NYSE:DIS) jumped 4.7% as the media giant edged past rival Netflix Inc (NASDAQ:NFLX) with 221 million streaming customers and announced it will increase prices for customers who want to watch Disney+ or Hulu without commercials.

Bumble Inc fell 8.6% on cutting its full-year revenue forecast, taking a hit from the Ukraine war, while also grappling with competition from rival Match Group Inc (NASDAQ:MTCH) in the online dating market.

Advancing issues outnumbered declining ones on the NYSE by a 1.54-to-1 ratio; on Nasdaq, a 1.25-to-1 ratio favored advancers.

The S&P 500 posted four new 52-week highs and 29 new lows; the Nasdaq Composite recorded 69 new highs and 22 new lows.

Nasdaq, S&P 500 retreat as rate hike fears cool stock rally
 

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Comments (29)
Ron Raymond
Ron Raymond Aug 12, 2022 4:10AM ET
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Powell lied, hasn’t decreased liquidity yet and even addedmore, look it up and fact check. Banks and institutions using this to advantage for huge short squeeze, as during pandemic when trading profits made them billions. Algo mania still, emphasis on using the mega caps to manipulate and their eearnings and forecasts don’t really matter when squeezing as the ponzi scheme continues.
Ron Raymond
Ron Raymond Aug 12, 2022 4:01AM ET
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It’s a lie, not peak inflation, not even close. Real prices actually rose. You will see..
David Acevedo
David Acevedo Aug 12, 2022 1:37AM ET
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If anyone wants to know why it dropped today its becuz the FTC is issuing an advanced notice is proposed rulemaking to address commercial surveillance, the "business of collecting, analyzing, and profiting from information about people". The FTC said companies are often incentivized " to collect vast troves of consumer information, only a small fraction of which consumers proactively share.
Kris Jay
Kris Jay Aug 11, 2022 8:22PM ET
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i do not fear paying my property tax as it is inevitable that the tax bill will come every six months.  I do fear a shark attack as it is not inevitable.   so pretty odd to "fear" Fed rate hikes, they are invevitable with inflation at 8.5% and worse core inflation which will be much harder to bring down.   So if you're long then nothing to be fearful of but know that in Q3 there will be earnings compression due to slow downs and multiples compression due to Fed hikes.  The mistake is thinking that Fed will pause or pivot sometime before 2024 when it may be possible that inflation is at 2%.
Dave Jones
Dave Jones Aug 11, 2022 8:22PM ET
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Great analysis!
Kris Jay
Kris Jay Aug 11, 2022 8:22PM ET
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Dave Jones  its been wrong so far... markets going up looking at this perfect scenario where inflation went down 0.5%.   still at 8.5% with wages up 5% but market is up thinking that Fed will stop raising rates
The stock Alley
The stock Alley Aug 11, 2022 6:16PM ET
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The dropped had nothing to do with rate hikes . You guys print anything. It was a selloff to take home some peofits before the weekend. Stocks will be a bit cheaper tomorrow and traders will buy it up which will send the market back up.
Kat Wills
Kat Wills Aug 11, 2022 3:27PM ET
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Always has a reason to "explain away" performances. Lots of assumptions, maybes, fears, guesses, etc.
The stock Alley
The stock Alley Aug 11, 2022 3:27PM ET
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For real they always lying anout why the marker moves . They say anything . Unless you can speak to each trader you dont know what was the reason.
Ale Viajero
Ale Viajero Aug 11, 2022 1:54PM ET
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sp500 is over inflated.. i dont believe the correction is over..
Stan Smith
Stan Smith Aug 11, 2022 12:49PM ET
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"...$1.9 trillion in new spending costs $0 The border is secure Republicans are the real police defunders Two consecutive quarters of economic contraction isn’t a recession “Inflation Reduction” Act 8.5% inflation = 0% Real wages -3% = “wages up” Serial Gaslighters...."
JIM VETTER
JIM VETTER Aug 11, 2022 12:49PM ET
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You're a liar
JIM VETTER
JIM VETTER Aug 11, 2022 12:49PM ET
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try reading the CBO's analysis about the joke called inflation reduction act. One thing you cab count on from dems is whatever they say, whatever they name, the exact opposite is the truth
Stan Smith
Stan Smith Aug 11, 2022 12:49PM ET
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JIM VETTER  You're gaslit!
Jimmy Doodoo
JimmyD Aug 11, 2022 12:49PM ET
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I think you just named all of #senilejoe's lies!
Stan Smith
Stan Smith Aug 11, 2022 12:46PM ET
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Mid term elections are coming up so don't expect any downside until then: "They pretend it’s real data, we pretend to trade it." lol......this in nothing but fabrications and spin.
Andrew Sim
Andrew Sim Aug 11, 2022 12:34PM ET
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whales R waiting up there to dump hard onto the retails
Kris Jay
Kris Jay Aug 11, 2022 12:34PM ET
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seemed to see a little of that today right after 930, larger volume spikes of 40M shares when minute by minute its been 200K shares traded. Post
 
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