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S&P 500 Closes Near 1-Month Low on Sooner Rate Liftoff Talk

Stock MarketsJun 18, 2021 04:20PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 closed at nearly one-month lows Friday as St. Louis Federal Reserve President James Bullard spooked the market after making a case for an earlier-than-expected rate to keep handle on inflation. 

S&P 500 fell 1.37%, the Dow Jones Industrial Average slumped 1.58%, or 553 points, and the Nasdaq Composite was down 0.92%.

Bullard, a non-voting Fed member, said he expected the first rate hike by the end of the 2022, earlier than the Fed’s current projections, which indicate lift in 2023.

“I put us starting in late 2022,” Bullard said Friday during a TV interview on CNBC. "[M]y forecast said 3% inflation in 2021 -- core PCE inflation -- and 2.5% core PCE inflation in 2022.".

"To me, that would meet our new framework where we said we’re going to allow inflation to run above target for some time, and from there we could bring inflation down to 2% over the subsequent horizon," he added.

The Fed's fingerprints - with a helping effort from fiscal stimulus - were all over the recent rally, and now that the central bank is looking to drain the well of stimulus, growth will slow -- and risk markets are taking note. 

"Investors are already grappling with the notion that the economy has been propped up markedly, thanks to monetary and fiscal support, but now market participants must accept the fact that the time has come to begin to remove – or at least talk about removing – the punch bowl, returning the economy to more organic means," Stifel said in a note.

"[In] the absence of trillions in spending and record low rates, no matter how solid the fundamentals, the economy is poised to slow from a more robust profile at the start of the year looking out to 2022 and beyond."

The week ahead promises to deliver yet more talk on tapering and inflation as several Fed members are slated to speak.

The hawkish talk from the Federal Reserve hasn’t spooked bond prices as yields, or rates, slipped.

The slip in rates took some by surprise, but it likely signals that the bond market is backing the Fed’s call that inflation will be transitory.

The move in bond yields is “more likely the bond market is buying into the Fed’s notion of inflation-dismissal rhetoric; the Fed has been clear it expects the recent bout of inflation to prove temporary, and as we move to the end of the year and into 2022, price pressures will expectedly ease,” Stifel added.

Banking stocks bore the brunt of the move in lower in rates, with JPMorgan Chase & Co (NYSE:JPM), Citigroup (NYSE:C) and Goldman Sachs Group (NYSE:GS) closing lower, and the latter down more than 3%.

Tech, usually a fan of falling rates, failed to take advantage of the move lower, though it did outperform relative to other sectors. 

Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Facebook (NASDAQ:FB) ended below the flatline.

Energy stocks, meanwhile, are set for a second-weekly loss, falling nearly 4% even as the oil prices remained firm.

In other news, Smith & Wesson Brands (NASDAQ:SWBI) jumped more than 17% after hiking its dividend by 60% and approving a $50 million stock buyback following better-than-expected quarterly results.

S&P 500 Closes Near 1-Month Low on Sooner Rate Liftoff Talk
 

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Comments (15)
John Kochkerian
John Kochkerian Jun 19, 2021 1:13AM ET
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Did this interview need to take place today, of all days? Quad witching? It's as if it was coordinated. A nonvoting member of the Fed. Thanks Dbag.
Jouni Matero
Jouni Matero Jun 19, 2021 1:13AM ET
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Obviously you are playing long everything lol
Todd Gray
Todd Gray Jun 18, 2021 9:11PM ET
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I wouldn't be surprised if come monday premarket, the algorithms of the rich buy it up, just to rip off all the retailer traders holding rational short and long VIX positions.
Atlantic Coast Money
Atlantic Coast Money Jun 18, 2021 9:11PM ET
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Nah. Blood bath on deck. Who cares about shorting gamblers. Taper talk is real. Whales are pulling out and handing bags to retail.
CT OREN
CT OREN Jun 18, 2021 9:04PM ET
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Good news! Hope it will drop further next week.
Jouni Matero
Jouni Matero Jun 18, 2021 9:04PM ET
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It will, sentiment clearly changed this week from unsure to scary and soon it's panic as smart bulls want to secure profits while permabulls will remain bagholders.
Pratt Man
Pratt Man Jun 18, 2021 8:05PM ET
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OMG. The world is coming to an end. Biden created a raging economy and trump is trying out his prison cloths.
Jerome NY
Jeff_Musk Jun 18, 2021 7:26PM ET
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Why did this happen on maturity???? It surely helped shortes or put buyers from yesterday tomanipulate stock market
Jouni Matero
Jouni Matero Jun 18, 2021 7:26PM ET
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This would be only fair as MM has manipulated market upwards for months now.
Mark Stallone
Mark Stallone Jun 18, 2021 7:22PM ET
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Biden inherited the greatest sleeping economy in modern global history, and he still screwed it up. All part of Building Back "Better" I guess.
Pratt Man
Pratt Man Jun 18, 2021 7:22PM ET
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The problem with your argument is that Australia and south Korea didn't have a sleeping economy. We didn't have to lose 12,000,000 jobs.
Stan Smith
Stan Smith Jun 18, 2021 7:03PM ET
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Lets see what contrived concoction the FED can conjure over the weekend to pump stocks (excuse the alliteration)
Al Gore
Al Gore Jun 18, 2021 6:54PM ET
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look at historical fed fund rates and u will see why there can never be another rate hike
Pratt Man
Pratt Man Jun 18, 2021 6:54PM ET
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the fed fund doesn't affect you. it's an over night rate for banks only. it should be eliminated for good. your we rates are set by the market.
Al Gore
Al Gore Jun 18, 2021 6:54PM ET
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Pratt Man  they will repo to maintain fed fund rate
Leon Kelly
Leon Kelly Jun 18, 2021 6:11PM ET
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Wait till Monday when the panic selling starts. this was nothing
RAMAKRISHNA RAO VENGALA
RAMAKRISHNA RAO VENGALA Jun 18, 2021 6:07PM ET
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Mr Bullard talking is an unnecessary talk. Even though the rate hike starts from 2023. Still so much time. But investors are exiting in a rush. Very incredible....
Jouni Matero
Jouni Matero Jun 18, 2021 6:07PM ET
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Very incredible only is the whole printer money and zero rate formed bubble. Rates should have been hiked already.
Pratt Man
Pratt Man Jun 18, 2021 5:41PM ET
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yeah the economy is so bad and rates are so high.. sell everything!
Stan Smith
Stan Smith Jun 18, 2021 5:23PM ET
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Bears Roar?? They can't raise rates ..there will be no lift off.. stop pumping these overvalued stocks
Mitchel Pioneer
Mitchel Pioneer Jun 18, 2021 5:04PM ET
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Mark your calendars.  A loss on a Friday is a rare as hens teeth these days.  Miracle on Monday?  We'll see.  With the US Ponzi Scheme overvalued by 80%+, who knows what's next.  Transitory inflation in a ***s eye.
John Walker
John Walker Jun 18, 2021 5:04PM ET
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I hope you are right and not a Monday massacre. Just do the opposite of what you think and you're good.
Ivan Ivan
Ivan Ivan Jun 18, 2021 4:57PM ET
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It's just another alibi for the big money manipulation. Routine case.
Ebony Barclay
Ebony Barclay Jun 18, 2021 4:44PM ET
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Good day , After facing a wave of crises we look forward with press on to the mark. Hoping to spend time with friends and family.
 
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