Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Wall Street sinks as Powell's comments fuel rate worries

Published 02/27/2018, 04:30 PM
© Reuters. Federal Reserve Chairman Jerome Powell speaks on a television as traders work on the floor of the New York Stock Exchange in New York
US500
-
DJI
-
DIS
-
CMCSA
-
BSBAy
-
M
-
IXIC
-
TFCFA
-
VIX
-

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks suffered on Tuesday their biggest daily drops since the selloff three weeks ago after comments from Federal Reserve Chairman Jerome Powell revived fears about more interest-rate increases than expected this year.

Powell gave an upbeat view on the U.S. economy and said data has strengthened his confidence on inflation. Traders boosted bets the central bank will squeeze in a fourth rate hike this year following the remarks.

Bond yields also rose, while the Cboe Volatility Index (VIX), the most widely followed barometer of expected near-term volatility of the S&P 500 index, rose 2.79 points to 18.59, its largest one-day gain also in nearly three weeks.

Powell's first semi-annual economic testimony as Fed chief before the U.S. Congress comes at a sensitive time for the market, which had been trying to recover from the recent selloff, which confirmed the market was in a correction, or down 10 percent from a Jan. 26 record high. Fears over rising rates in part had sparked the selloff.

In his prepared remarks, Powell hinted that the central bank would stick to its current path of gradual rate hikes, but his comments during congressional testimony seemed to spook the market.

"He said it's his impression the economy was getting stronger, which subtly gave the indication that he was going to raise his personal forecast for four rate hikes this year," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

The Fed is widely expected to raise rates next month and in December signaled a total of three rate hikes this year. Fed officials will release new forecasts, including their views on the appropriate future path of rate hikes, when they meet next month.

The Dow Jones Industrial Average (DJI) fell 299.24 points, or 1.16 percent, to 25,410.03, the S&P 500 (SPX) lost 35.32 points, or 1.27 percent, to 2,744.28 and the Nasdaq Composite (IXIC) dropped 91.11 points, or 1.23 percent, to 7,330.35.

Indexes posted their biggest daily percentage losses since Feb. 8.

"Sure enough, rates here have moved up a little bit as well, probably a little bit more so here based on his testimony, but I don't think we are in a danger zone or anything of a spike in rate hikes by the Fed," said Mark Kepner, managing director, sales and trading in Chatham, New Jersey.

Comcast (O:CMCSA) fell 7.4 percent after the U.S. cable giant offered to buy Sky (L:SKYB) for $31 billion in an unsolicited approach, taking on Rupert Murdoch's Fox and Bob Iger's Walt Disney in the battle for Europe's biggest pay-TV group.

The stock was the biggest drag on the S&P 500. Disney (N:DIS) dropped 4.5 percent and Twenty-First Century Fox (O:FOXA) fell 3 percent following the news.

Macy's (N:M) rose 3.5 percent after reporting higher-than-expected same-store sales growth for the fourth quarter. The biggest U.S. department store chain said sales at established stores could mark their first annual gain in four years.

Declining issues outnumbered advancing ones on the NYSE by a 3.38-to-1 ratio; on Nasdaq, a 3.07-to-1 ratio favored decliners.

The S&P 500 posted 44 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 93 new highs and 50 new lows.

© Reuters. Federal Reserve Chairman Jerome Powell speaks on a television as traders work on the floor of the New York Stock Exchange in New York

About 7.4 billion shares changed hands on U.S. exchanges. That compares with the 8.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.