Wall Street extends the sell-off as Powell hints at a rate hike

NEW YORK (Reuters) – U.S. stocks closed lower on Wednesday as Federal Reserve Chairman Jerome Powell’s congressional testimony reinforced the central bank’s aim to rein in inflation as he hinted at the possibility of raising interest rates again.

All three major US stock indices posted their third daily declines in a row, with tech-related and mega-tech stocks the heaviest weighting.

“The market appears to be catching a breath after a great start to the month,” said Ryan Detrick, senior market analyst at Carson Group in Omaha. “Historically, June hasn’t been very strong for stocks, but this year could go down as one of the strongest Junes ever; so having a little breakout in streaming stocks is perfectly normal.”

Tesla Inc (TSLA.O), along with AI-related stocks like Microsoft Corp (MSFT.O) and Nvidia Corp (NVDA.O), were the heaviest draws.

Testifying before the US House of Representatives Financial Services Committee, Powell reiterated the fact that the central bank remains “firmly committed to bringing inflation down to our 2% target,” and said it would be a “good guess” that future rate hikes are in the cards if the economy stays on track. Present.

“Two trips, and that’s what the dot plot told us,” Detrick said. “There could be another rate hike, but I don’t think anyone is buying the fact that there will be two. The markets are assuming the Fed is coming to an end.”

At last glance, financial markets have priced in a 74.4% possibility of a 25 basis point rate hike at the close of the July monetary policy meeting, according to CME’s FedWatch tool.

Powell is scheduled to testify before the Senate Banking Committee on Thursday.

The Dow Jones Industrial Average fell 102.35 points, or 0.3%, to 33,951.52 points, the Standard & Poor’s 500 lost 23.02 points, or 0.52%, to 4,365.69 points, and the Nasdaq Composite Index fell 165.10 points, or 1.21%, to 13,502.20.

Among the 11 major sectors of the S&P 500, energy stocks (.SPNY) were the main gainers, rebounding from their biggest daily decline in more than a month. Technology (.SPLRCT) and Communications Services (.SPLRCL) saw the largest percentage drop.

Chips hit technology stocks hard. The Philadelphia SE Semiconductor Index (.SOX) fell 2.7%, the largest daily drop this month.

Tesla Inc was the biggest drag on the S&P 500 and Nasdaq, down 5.5%. Barclays downgraded the stock to “equal weight” from “overweight,” saying the electric car maker’s recent rally has been too steep relative to the fundamentals.

“A big part of today’s weakness is because Tesla has had one of its worst days in a while,” Detrick added. “It’s a stock that was due to rest, too.”

“After a record winning streak, a kind of weakness is totally acceptable and normal.”

Package delivery companies FedEx (FDX.N) and United Parcel Service Inc (UPS.N) fell 2.5% and 2.1%, respectively, after FedEx posted disappointing quarterly earnings and said slumping global demand was squeezing its margins.

Crypto companies including Coinbase (COIN.O), Riot Platforms (RIOT.O), Marathon Digital (MARA.O) and Bit Digital (BTBT.O) gained between 1.8% and 4.2%, with bitcoin surging to $30,000 level.

Low issues outnumbered high issues on the NYSE by a ratio of 1.04 to 1; On the Nasdaq, the ratio was 1.42 to 1 in favor of declining stocks.

The S&P 500 hit a new 52-week high and no new lows. The Nasdaq Index posted 80 new highs and 123 new lows.

Trading volume on US exchanges reached 10.62 billion shares compared to an average of 11.41 billion for the full session over the last 20 trading days.

Reporting by Stephen Kolb. Additional reporting by Shubham Batra, Yohan M Cherian and Anika Biswas in Bengaluru. Edited by Aurora Ellis

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