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Wall Street closes lower as the Fed pounds rate hike drum

Economy Oct 06, 2022 07:05PM ET
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© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 7, 2022. REUTERS/Brendan McDermid
 
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By Herbert Lash

(Reuters) -Wall Street's major indexes closed lower on Thursday as concerns mounted ahead of closely watched monthly nonfarm payrolls numbers due on Friday that the Federal Reserve's aggressive interest rate stance will lead to a recession.

Markets briefly took comfort from data that showed weekly jobless claims rose by the most in four months last week, raising a glimmer of hope the Fed could ease the implementation since March of the fastest and highest jump in rates in decades.

The equity market has been slow to acknowledge a consistent message from Fed officials that rates will go higher for longer until the pace of inflation is clearly slowing.

Chicago Fed President Charles Evans was the latest to spell out the central bank's outlook on Thursday, saying policymakers expect to deliver 125 basis points of rate hikes before year's end as inflation readings have been disappointing.

"The market has been slowly getting the Fed's message," said Jason Pride, chief investment officer for private wealth at Glenmede in Philadelphia.

"There's a likelihood that the Fed with further rate hikes pushes the economy into a recession in order to bring inflation down," Pride said. "We don't think the markets have fully picked up on this."

Pride sees a mild recession, but in the average recession there has been a 15% decline in earnings, suggesting the market could fall further. The S&P 500 has declined 22% from its peak on Jan. 3.

Despite the day's decline, the three major indexes were poised to post a weekly gain after the sharp rally on Monday and Tuesday.

The labor market remains tight even as demand begins to cool amid higher rates. On Friday the nonfarm payrolls report on employment in September will help investors gauge whether the Fed alters its aggressive rate-hiking plans.

Money markets are pricing in an almost 86% chance of a fourth straight 75 basis-point rate hike when policymakers meet on Nov. 1-2.

To be clear, not everyone foresees a hard landing.

Dave Sekera, chief U.S. market strategist at Morningstar Inc, said growth will remain sluggish for the foreseeable future and likely will not start to reaccelerate until the second half of 2023, but he does not see a sharp downturn.

"We're not forecasting a recession," Sekera said. "The markets are looking for clarity as to when they think economic activity will reaccelerate and make that sustained rebound.

"They're also looking for strong evidence that inflation will begin to really trend down, moving back towards the Fed's 2% target," he said.

Ten of the 11 major S&P 500 sectors fell, led by a 3.3% decline in real estate. Other indices also fell, including semiconductors, small caps and Dow transports. Growth shares fell 0.76%, while value dropped 1.18%.

Energy was the sole gainer, rising 1.8%.

Oil prices rose, holding at three-week highs after the Organization of the Petroleum Exporting Countries plus its allies agreed to cut production targets by 2 million barrels per day (bpd), the largest reduction since 2020.

The Dow Jones Industrial Average fell 346.93 points, or 1.15%, to 29,926.94, the S&P 500 lost 38.76 points, or 1.02%, to 3,744.52 and the Nasdaq Composite dropped 75.33 points, or 0.68%, to 11,073.31.

Tesla (NASDAQ:TSLA) Inc fell 1.1% as Apollo Global Management (NYSE:APO) Inc and Sixth Street Partners, which had been looking to provide financing for Elon Musk's $44 billion Twitter deal, are no longer in talks with the billionaire.

Alphabet (NASDAQ:GOOGL) Inc closed basically flat after the launch of Google's new phones and its first smart watch.

Volume on U.S. exchanges was 10.57 billion shares, compared with the 11.67 billion average for the full session over the past 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.32-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favored decliners.

The S&P 500 posted three new 52-week highs and 31 new lows; the Nasdaq Composite recorded 46 new highs and 118 new lows.

Wall Street closes lower as the Fed pounds rate hike drum
 

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Comments (29)
Kaushal Shah
Kaushal Shah Oct 07, 2022 10:08AM ET
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all countries will now no longer take $ as common trading currency. will follow Russian model of controlling their currency by gold instead $. biden lost bettle completely.
Robert Flippa
Robert Flippa Oct 07, 2022 3:38AM ET
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fed pumped Monday and Tuesday just to prepare for the shellacking in a few hours.overall not a bad week at par
Daniel Hall
Daniel Hall Oct 06, 2022 11:43PM ET
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of COURSE there will be a recession. That is the ONLY way interest rate manipulation has a chance of affecting inflation
Ed Stecher
Ed Stecher Oct 06, 2022 8:31PM ET
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That dollar bubble needs to pop. The workd is watching and hoping it does.
Casador Del Oso
Casador Del Oso Oct 06, 2022 4:34PM ET
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Let's face it. If you're a longer-term investor you should have cashed out months ago. That way all you have to do is wait for the bottom to form and buyback your stocks once capitulation happens.
nils Hullmann
nils Hullmann Oct 06, 2022 4:34PM ET
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peter lynch likes to talk to you
taylor jason
taylor jason Oct 06, 2022 4:34PM ET
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why do people think there has to be capitulation? If everyone is expecting the market decline, as they are now, capitulation won't happen. capitulation generally only happens during market crashes where most are caught off guard. just look at option data. a record $8.1 billion in puts were sold last week
Bradley Jeko
Bradley Jeko Oct 06, 2022 4:34PM ET
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taylor jason And why fo people think that once we do hit a “bottom”, that it’s just going to “V-rally” back to ATH’s in 12 months?
Mike Nordic
MikeNordic Oct 06, 2022 3:33PM ET
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CRIMINAL behavior by the FED. Their whole inflation theory is baseless. Yesterday OPEC showed why. Evergy and oil control inflation not rates. Rates cause a recession domestically. We will end up in recession and oil won't fall bellow 90$ fueling further inflation.
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Peter O Neill
Peter O Neill Oct 06, 2022 3:33PM ET
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What a ****
Mike Nordic
MikeNordic Oct 06, 2022 3:33PM ET
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No it's not. Before the war oil was between 70 and 80. After the was the bottom has been 80 and it topped 120. Yesterday the oil cut from OPEC ocreased again oil by over 10% from 82 to almost 90. You are simply clueless to think the fed will control what OPEC and Russia decides. You only support more pain and domestic bankruptcies for the US with the rate hikes.
Mike Nordic
MikeNordic Oct 06, 2022 3:33PM ET
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Oil was 78 before the OPEC decision and its now closed to 90. Tell that this over 10% move up on oil is not war and OPEC related and how the fed will push it down
Mike Nordic
MikeNordic Oct 06, 2022 3:33PM ET
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Oil demand is not controlled by the FED. you can cause a depression in the US, but as you saw yesterday the OPEC countries will simply reduce the oil supply so their earnings won't change. You will end up will both depression and expensive and scarce oil and no amount of QE will be enough to restart the economy
Mike Nordic
MikeNordic Oct 06, 2022 3:33PM ET
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Did the money supply increase by over 10% yesterday after the OPEC meeting? Your theory is false
Mitchel Pioneer
Mitchel Pioneer Oct 06, 2022 3:25PM ET
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Well would you look at that.  Another "late trade" miracle in the works?  Where are all the sellers "in late trade" during a "rally"???  Can't have it close below 30K, now can we?  Criminally manipulated JOKE.
First Last
First Last Oct 06, 2022 3:25PM ET
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You whined for nothing.  Market has been dipping since 3:30 pm.
Mary Mullin
Mary Mullin Oct 06, 2022 3:25PM ET
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your good to reply to everyone posts, but I never see you post anything The your oresudent is a disaster.
First Last
First Last Oct 06, 2022 3:25PM ET
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Mary Mullin   Biden ain't a great potus, but he ain't a disaster like Trump.  Not much to commend nor to blame him for, despite retrumplicans biasedly blaming everything on him and calling him both "sleepy" AND "woke".
Tom Michaels
Tom Michaels Oct 06, 2022 2:46PM ET
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Powell is a piece of manure anyway. Another excuse.
Tom Michaels
Tom Michaels Oct 06, 2022 2:44PM ET
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Excuse da jour, get over it already and quit with the manipulation so we can make some money.
First Last
First Last Oct 06, 2022 2:44PM ET
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If you ain't making money in the market, maybe your market opinion ain't worth anything.
Mary Mullin
Mary Mullin Oct 06, 2022 2:44PM ET
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Prison Mike
Prison Mike Oct 06, 2022 2:33PM ET
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Tomorrow Jpow will layeth the smacketh down on the retail investors
 
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