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Wall St slides as services data spooks investors about Fed rate hikes

Published 12/05/2022, 06:44 AM
Updated 12/05/2022, 07:36 PM
© Reuters. FILE PHOTO: "Stock Exchange" is seen over an entrance to the New York Stock Exchange (NYSE) on Wall St. in New York City, U.S., March 29, 2021.  REUTERS/Brendan McDermid/File Photo

By David French

(Reuters) - U.S. markets ended Monday lower, as investors spooked by better-than-expected data from the services sector re-evaluated whether the Federal Reserve could hike interest rates for longer, while shares of Tesla (NASDAQ:TSLA) slid on reports of a production cut in China.

The electric-vehicle maker slumped 6.4% on plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month.

This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline.

Broadly, indexes suffered as data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.

The data came on the heels of a survey last week that showed stronger-than-expected job and wage growth in November, challenging hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.

"Today is a bit of a response to Friday, because that jobs report, showing the economy was not slowing down that much, was contrary to the message which (Chair Jerome) Powell had delivered on Wednesday afternoon," said Bernard Drury, CEO of Drury Capital, referencing comments made by the head of the Federal Reserve saying it was time to slow the pace of coming interest rate hikes.

"We're back to inflation-fighting mode," Drury added.

Investors see an 89% chance that the U.S. central bank will increase interest rates by 50 basis points next week to 4.25%-4.50%, with the rates peaking at 4.984% in May 2023.

The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.

The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and BlackRock (NYSE:BLK) among those that believe a recession is likely in 2023.

The Dow Jones Industrial Average fell 482.78 points, or 1.4%, to close at 33,947.1, the S&P 500 lost 72.86 points, or 1.79%, to end on 3,998.84, and the Nasdaq Composite dropped 221.56 points, or 1.93%, to finish on 11,239.94.

In other economic data this week, investors will also monitor weekly jobless claims, producer prices and the University of Michigan's consumer sentiment survey for more clues on the health of the U.S. economy.

Energy was among the biggest S&P sectoral losers, dropping 2.9%. It was weighed by U.S. natural gas futures slumping more than 10% on Monday, as the outlook dimmed due to forecasts for milder weather and the delayed restart of the Freeport liquefied natural gas (LNG) export plant.

EQT Corp (NYSE:EQT), one of the largest U.S. natural gas producers, was the steepest faller on the energy index, closing 7.2% lower.

Financials were also hit hard, slipping 2.5%. Although bank profits are typically boosted by rising interest rates, they are also sensitive to concerns about bad loans or slowing loan growth amid an economic downturn.

Meanwhile, apparel maker VF Corp (NYSE:VFC) dropped 11.2% - its largest one-day decline since March 2020 - after announcing the sudden retirement of CEO Steve Rendle. The firm, which owns names including outdoor wear brand The North Face and sneaker maker Vans, also cut its full-year sales and profit forecasts, blaming weaker-than-anticipated consumer demand.

© Reuters. FILE PHOTO:

Volume on U.S. exchanges was 10.78 billion shares, compared with the 11.04 billion average for the full session over the last 20 trading days.

The S&P 500 posted six new 52-week highs and four new lows; the Nasdaq Composite recorded 105 new highs and 133 new lows.

Latest comments

successful bottomout is done. smoothsailing is ahead
I think they have to pivot, and let inflation rise in a managed way. Onshoring of jobs will be huge will also increase inflation, but wages will rise.
fed probably goes with token 25 bp hike now and maybe one more 25 bp at next meeting to begin dovish campaign thereafter. if so, it will be very bullish.
american markets are gambling.......less trustable than china....even after good data they are falling........
typical profit taking day was today. massive yearend rally, January effect rally will rocket tomorrow.
looks like the vix hit first the pivot 19 before the dow hits 35k....
all hail Adolph Biden 🤚
Yeah, they were a great bunch.
Its funny because because the joke is that Biden hates Jewish people. What a comedic genius.
Its funny because because the joke is that Biden hates J e wish people. What a comedic genius.
Biden the hero
One of these Biden days.
Does this mean the Bull Market you claimed started last week has already ended. such garbage!
They didn't claim a bull market started.. they said something verifiable which is the Dow had recovered enough from it's low that it entered bull market territory. Maybe try reading? Too much to ask?
Todd alias DBSounds like you are stuck long a bunch of crypto and must be a hater. Lighten up Todd
Larry the lumpster lol
read it again , but very slowly "Wall St falls after strong service-sector data feeds"
Tomorrow, Tuesday, is a buy the dip in the morning day. Up from there
Flagrant, fraudulent 34K floor under the laughingstock of the investing world.  This joke of a market has set a standard for fraud that will never be equaled.
Overused and still not true
Pension fund scam is brewing after ftx saga, media distorting the facts with silly reasons
Please elaborate.
I don't know what people was expecting. it was obvious since is December and people is getting ready to sell their products.
Bidens song about your 401k....slip sliden away .... God what a disaster this guys been. Glad I didn't vote for him.
All these jobs he's creating, and an economic recovery from the pandemic, bringing critical manufacturing back to American shores and restoring our standing in the world -- a real loser, for sure.
thats what I’m saying
HOW is Biden creating jobs?? You just lost any credibility with that statement.
is it that mkt thinks fed is going to destroy stock mkt? so be it
You still make no sense at all. Learn hiw to form a sentence.
During the QE era it was bad news is good news so it's not bizarre at all
unbelievable how the WS braintrusts have been all over the board on what to buy and what to sell. Reversing their previous's almost a comedy act.
It's almost as if there's uncertainty, as if VIX has been above average.
WS never talks like they are unsure. Ha....ha....ha...ha.
it's just your talks not investors
So the market did NOT open red?
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