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Wall Street closes out weak February as Fed concerns remain

Published 02/28/2023, 05:29 AM
Updated 02/28/2023, 07:21 PM
© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., February 27, 2023.  REUTERS/Brendan McDermid

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks closed out February in subdued fashion and each of the three major indexes ended with monthly declines, as investors continue to assess whether interest rates will remain high for an extended period of time.

After a strong performance in January, stocks retreated in February as economic data and comments from U.S. Federal Reserve officials prompted market participants to reconsider the odds the central bank would hike rates to a higher level than market forecasts and keep them elevated for longer than was initially expected.

"The market in many ways expected things to go south more quickly, forcing the Fed to pivot, or pause, or cut rates sooner than the Fed was saying," said Johan Grahn, head ETF market strategist at Allianz (ETR:ALVG) Investment Management in Minneapolis.

"The staying power of the Fed is much more determined and steadfast than the staying power of investors so it’s back to the old mantra of do you really want to fight the Fed on this and in this case it is still a mistake to try and do that."

The Dow Jones Industrial Average fell 232.39 points, or 0.71%, to 32,656.7, the S&P 500 lost 12.09 points, or 0.30%, to 3,970.15 and the Nasdaq Composite dropped 11.44 points, or 0.1%, to 11,455.54.

For the month, the S&P 500 fell 2.61%, the Dow slid 4.19% and the Nasdaq shed 1.11%

Traders have started to price in the chances of a bigger 50 basis-point rate hike in March, although the odds remain low at about 23%, according to Fed fund futures, which suggest rates peaking at 5.4% by September, up from 4.57% now.

BofA Global Research cautioned the Fed could even hike interest rates to nearly 6%.

Economic data on Tuesday, however showed a reading of consumer confidence unexpectedly fell in February, while a gauge of home prices slowed further in December.

The blue-chip Dow dipped, weighed down by a 3.80% drop in Goldman Sachs (NYSE:GS) after Chief Executive David Solomon said the bank is considering "strategic alternatives" for its consumer business.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 2.3 basis points at 4.816%. A pullback in yields following the economic data helped boost the S&P 500 and Nasdaq, but the two indexes faded late in the session to close lower.

Volatility has been common since the Fed began its rate hiking cycle last year. The S&P 500 has seen 18 sessions with gains or losses of at least 1% this year, equal to the first two months of 2022, which eventually saw 122 such trading days on the year.

Chicago Fed President Austan Goolsbee said the Fed must supplement traditional government data and readings from financial markets with real-time, on-the-ground observations of economic conditions if it is to make good policy, and not rely on market reactions.

Meta Platforms rose 3.19% after the Facebook (NASDAQ:META) parent said it was creating a new top-level product group focused on generative artificial intelligence.

Target Corp (NYSE:TGT) gained 1.01% after the big-box retailer reported a surprise rise in holiday-quarter sales but cautioned on 2023 earnings due to an uncertain U.S. economy.

Norwegian Cruise Line (NYSE:NCLH) Holdings Ltd plunged 10.18% after the cruise operator's full-year profit forecast fell short of estimates. It attributes the squeeze to soaring fuel and labor costs.

Volume on U.S. exchanges was 11.63 billion shares, compared with the 11.46 billion average for the full session over the last 20 trading days.

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., February 27, 2023.  REUTERS/Brendan McDermid

Declining issues outnumbered advancing ones on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.

The S&P 500 posted 9 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 85 new highs and 91 new lows.

Latest comments

Inflation is just a way to move Wealth away from the poor without them knowing it
Inflation will remains the same despite demand will be just change in hand. Fed is following Orthodox strategy which can be succeed only on the papers.
poor looser Mitchel Poneer he's still blaming the market for his short comings.... mitch you're becoming quite a joke up here....
FED chairman should be blunt - "we will keep raising rates as long as necessary and as high as necessary, regardless of what markets do. Screw all speculators". At least it would clear the so-called "rate fears".
More losses miraculously whisked out of the system, flagrantly as ever.  Never see a criminally manufactured "rally" go through these intraday gyrations.  Keep it propped at the most fraudulently overvalued levels in history, that's patently obvious.  Make no effort whatsoever to disguise the CRIMINAL MANIPULATION.  Biggest investment JOKE in the world.
Market closed at low of day.  Should you be lauding the market?
you came back three hours to what prove mitch wrong? the person who repeats the same thing everyday and doesn't care what you think. what's the word for doing the same thing over and over and expecting a different result?
  I'm not expecting any enlightenment from Mitch.  He's a lost cause.  But I've some hope for those who agree w/ him or are new to his spiel.
Wake up manipulators in Nasdaq. Bond market point longer & higher rates. Why Nasdaq is still cheating?
fomo and good earning for some companies
fomo was gone last week and never come back for some times.
  "never" means for ALL time
there is not much downside. buy it
Fugazi my friends
Free fall. Lack of confidence level
0.05% down is free fall?
"Free fall"  -- this is you definition of a free fall?
  A drama queen's definition
future is up now. your projection is not accurate. better comment after fact.
Relax, Ray. It’ll be ok
open is down. get over it. trump lost.
just tank and get it over already
Zoom issues the magic word 'forecast '........ surprised it didn't use the other 'plan' and 'expected' words to push the shares even higher........
"Forecast" is the proper word, so you might be the only one surprised.
don't forget AI - they all need share buy back, job layoffs and AI to push the prices to the moon so the execs can dump on the retail investor - watch Palentir CEO  and Musk - experts in the pump and dump scheme
shut up
whatever % the Fed has in mind let it do one jumbo hike like 50 or 75 or 100 bps in one go and do away with this non sense of rate hike news for last 14 months. due to base effect, CPI will be below 6 % this time and PCE price index will be well below 5 % and may near 3-4 % in coming few months which is nearer to 2 % fed tgt. markets are forward looking and i dont see any reason for mkts to fall any further
inflation is going down. Probably now they want the support of other central banks. It's not only a problem of America, so all must to increase for see some good results.  Maybe Japan too will do it.
Yes so jobless rates can spike and companies debts will become even more expensive. But at least it’s over with am I right
  People in the peanut gallery should just leave if they don't wanna watch the show.
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