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Wall St sinks after weak data, hawkish Fed comments

Published Jan 18, 2023 07:20AM ET Updated Jan 18, 2023 07:21PM ET
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© Reuters. Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly
 
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By Sinéad Carew and Shreyashi Sanyal

(Reuters) - The S&P 500 and the Dow lost almost 2% on Wednesday, their biggest daily drops in more than a month, after weak economic data fueled recession worries while hawkish comments from Federal Reserve officials soured investor moods further.

Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December, while production at U.S. factories fell more than expected and November output was weaker than thought.

"It seems that investors are finally coming to the conclusion that getting inflation under control is not a free lunch and that all the tightening the Fed has had to do to get inflation moving in the right direction, comes with economic costs," said Michael Reynolds, vice president of investment strategy at Glenmede.

"Investors may have had this false belief that this soft landing scenario was a higher probability event than it actually is."

The Dow Jones Industrial Average fell 613.89 points, or 1.81%, to 33,296.96 and the S&P 500 lost 62.11 points, or 1.56%, to 3,928.86. The Nasdaq Composite dropped 138.10 points, or 1.24%, to 10,957.01.

Wednesday's decline was Nasdaq's first loss in eight sessions while the S&P and the down both saw their biggest daily percentage declines since Dec. 15.

With Wall Street's major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw weak data as an opportunity to take profits.

"The market was overbought. Today's economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year," said Stovall.

The weakest sectors on Wednesday were the defensive consumer staples, down 2.7%, and utilities, which fell 2.4%. In comparison, the best performers were more growth heavy sectors such as communications services, down 0.9%, and technology, down 1.3%.

Earlier in the day, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

And late in the afternoon, Philadelphia Federal Reserve President Patrick Harker said that he expects the Fed to raise rates a few more times this year although he reiterated earlier comments that he's ready for the U.S. central bank to move to a slower pace of rate hikes due to signs of cooling inflation.

The Fed commentary also highlighted the disparity between the U.S. central bank's estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

Moderna (NASDAQ:MRNA) Inc shares rose 3.3% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc (NYSE:PNC) shares tumbled 6% after it missed estimates for its fourth-quarter profit.

Declining issues outnumbered advancing ones on the NYSE by a 1.88-to-1 ratio; on Nasdaq, a 1.98-to-1 ratio favored decliners.

The S&P 500 posted nine new 52-week highs and 2 new lows; the Nasdaq Composite recorded 78 new highs and 20 new lows.

On U.S. exchanges 11.76 billion shares changed hands on Wednesday compared with the 10.45 billion average for the last 20 sessions.

Wall St sinks after weak data, hawkish Fed comments
 

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Comments (16)
anil kumar
anil kumar Jan 19, 2023 6:01AM ET
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Members of G7 are under pressure, They need fresh investment to raise from bottom, otherwise print more paper notes, Microsoft, Tesala, Amazon... You see, cutting expenses, short term many will bite sand
Sylvia Doloff
Sylvia Doloff Jan 19, 2023 5:36AM ET
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joe Biden camel Harris people are losing all thier money recession is everywhere inflation housing food gas the worst regime in our history
Brad Albright
Brad Albright Jan 19, 2023 5:36AM ET
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I know!!! And so many people with jobs! It's just terrible.
First Last
First Last Jan 19, 2023 5:36AM ET
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Inflation's causes are from abroad.  Inflation rates are higher in many other countries than in the US.
Manas Sahoo
Manas Sahoo Jan 18, 2023 8:11PM ET
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The economy is sinking !! But still Fed see's need of agressive rate hikes. Unbelievable!!!
First Last
First Last Jan 18, 2023 8:11PM ET
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0.75% rate hikes are aggressive.  0.25% hikes are not.
Aconomics adub
Aconomics adub Jan 18, 2023 8:11PM ET
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Pow wow chicken out . He would rather do the long drawn out .25 than to quickly stay the .75 course and get it over
First Last
First Last Jan 18, 2023 8:11PM ET
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Aconomics adub   The Fed should be doing what's best for the US economy, not what's quickest.
Erikke Evans
Erikke Jan 18, 2023 5:33PM ET
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This is ridiculous Jerome. There's a snake in the house. Stop beating it with a stick every few months and shoot it.
Jay Garrelts
Jay Garrelts Jan 18, 2023 5:28PM ET
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42 trillion dollars created since 2020 64% of it went to those in the top 1% of wealth
Clay Douglass
Clay Douglass Jan 18, 2023 4:22PM ET
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Biden did it all.
Midnight Trader
Midnight Trader Jan 18, 2023 4:22PM ET
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Starting with trump
Dean Wa
Dean Wa Jan 18, 2023 4:22PM ET
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Midnight Trader  Started with Obama, More debt than all previous Presidents COMBINED.
First Last
First Last Jan 18, 2023 4:22PM ET
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Dean Wa   GFC started under anti-regulation Bush.
Ma Lu
Ma Lu Jan 18, 2023 3:34PM ET
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So, that's the end to the promised 2023 recovery.
Stock Market Genius
Stock Market Genius Jan 18, 2023 3:34PM ET
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lol
Kris Jay
Kris Jay Jan 18, 2023 3:34PM ET
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maybe at the end of the year, but yes, "irrational exhuberence" in the market since beginning of January.    There is no "up" position here.  Inflation high, Fed will hike rates further.  inflation low, its because the economy is slowing.   niether one is good for equities.  50bps or 25bps in Feb doesnt matter, economy is slowing, growth is going to go negative to get to 2% inflation.
simon Leblanc
simon Leblanc Jan 18, 2023 3:08PM ET
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manipulation with dark pool at it's best ...wow.
Stephon Starrantino
Stephon Starrantino Jan 18, 2023 2:38PM ET
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Why would the feds make commnets like that when inflation is coming down? Why
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Kris Jay
Kris Jay Jan 18, 2023 2:38PM ET
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ja sa  Powell is stuck trying to get inflation under control which was created by DEM spending.  trillions of dollars of give-aways.
Kris Jay
Kris Jay Jan 18, 2023 2:38PM ET
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Mike Wellons  inflation is still greater than 6%, that is considered high and far from the 2% target,  even with cooked numbres to now calculate CPI over 1 year rather than 2 (so the lower numbers in 2020 are now not compared against), and excluding all of the inflation-impacting things like energy and food.   Eggs alone are increasing at a 60% yoy clip..  Yes 60%.   understand that the government is "cooking" the numbers that are reported.  when politicians want to look better, sympathetic insiders adjust the numbers.  Its just like we found out that the BLS cooked the numbers prior to mid-term elections.  BLS had said 1million jobs were created in the spring of 2022 and Philly fed tells us in late December that in fact only 10,000 jobs were created during that period.
First Last
First Last Jan 18, 2023 2:38PM ET
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Kris Jay   Inflation rate is almost back down to mid-2021 levels, before Russia started massing troops along Ukraine's border and before Russia really weaponized energy exports.
Kris Jay
Kris Jay Jan 18, 2023 2:38PM ET
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First Last  i dont understand the point.  you are suggesting that the FED goal is now to only match inflation of 2021?   Russia has nothing to do with anything.  We havent bought Russian oil or nnatgas in nearly a year now, no western nation has.   Clearly that is not the source of inflation.  Administrative mismanagement (calling inflation transitory in 2021 and not doing anything) and over spending for Covid-19 in give-aways ( employee stay-at home weekly checks due to unnecceary lockdowns, employer PPP loan forgiveness, etc) and further politician buying votes with more give-aways like loan forgiveness,  leaving $1B of equipment in Afghanistan that had to be replaced, sending billions to Ukraine,  keeping an open border where now we have to provide healthcare, education food and shelter for 3M people who are not on tax roles or payrolls. Vote only for politicians who will vote for a balanced budget ammendment.
First Last
First Last Jan 18, 2023 2:38PM ET
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Kris Jay   You said, "inflation ... was created by DEM spending".  I'm showing correlation of inflation to Russian aggression.   Whether it's also causation, ...
SirajAhmed Zehri
SirajAhmed Zehri Jan 18, 2023 2:09PM ET
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SirajAhmed
 
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