US stocks fall as comments from Fed officials dash hopes for a pivot on rate hikes
- US stocks fell Thursday, marking a second session of losses for Wall Street.
- Fed officials Esther George and James Bullard separately indicated the Fed is still on course for more rate hikes.
US stocks closed in the red Thursday, pressured by rising Treasury yields, with moves underscoring recession worries among investors as Federal Reserve officials indicated the central bank still needs more rate hikes to pull down inflation.
Wall Street's major equity indexes fell for a second consecutive session. None of the S&P 500's 11 sectors ended higher. The utilities and consumer discretionary groups fared the worse, losing roughly 2% each.
Equities lost ground as Treasury yields scaled higher. The spread between the one-year yield and the 10-year yield inverted by almost a full percentage point, the most inverted level since the one-year bill was reintroduced in early June 2008, according to fixed-income data firm Tradeweb. Further yield curve inversion highlighted fears that the world's largest economy is headed into a recession on the back of the Fed's aggressive rate hikes.
Kansas City Fed President Esther George told The Wall Street Journal it may not be possible to reduce such high levels of inflation without the economy contracting.
Here's where US indexes stood at the 4:00 p.m. opening bell on Thursday:
- S&P 500: 3,946.72, down 0.3%
- Dow Jones Industrial Average: 33,546.45, down 0.02% (7.38 points)
- Nasdaq Composite: 11,144.96, down 0.35%
"I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn't get some painful outcomes," she said in an interview published Wednesday. George said expectations for the Fed to stop raising rates were premature, pointing to strong price pressures in labor-intensive service sectors.
Separately, St. Louis Federal Reserve President James Bullard in prepared remarks said the Fed's key policy rate "will need to be increased further" to attain a sufficiently restrictive level.
The Fed in 2022 has jacked up the fed funds rate from 0% to a range of 3.75%-4%, including four consecutive, hefty hikes of 75 basis points. Inflation eased somewhat in October but the headline rate of 7.7% towers over the Fed's 2% goal.
"Thus far, the change in the monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023," he said.
Along with viewpoints voiced by Fed officials, investors weighed quarterly results and economic data. Macy's jumped after the retailer raised its yearly earnings forecast. Kohl's stock swung higher. The shares had fallen earlier in the session after the clothing and housewares retailer pulled its guidance for the year.
Weekly jobless claims declined by 4,000 to 222,000. Factory activity in the Philadelphia area sharply dropped by more than expected in November.
Here's what else is happening today:
- A new FTX bankruptcy filing shows the fair value of the firm's crypto holdings is just $659,000, after founder Sam Bankman-Fried said they were worth $5.5 billion.
- Stagflation is now the consensus view on Wall Street for 2023, says Bank of America.
- The Conservative Party-led UK government laid out a 55 billion pound ($65 billion) budget. The government is aiming to restore its credibility after a prior tax plan drove the pound to an all-time low.
- 'Big Short' investor Michael Burry touts gold as a winner from the FTX fiasco and teased a bet against the stock market.
- Americans are reportedly paying the biggest-ever premium for diesel at the pump after the fuel source rose in price by 50%.
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