Renewed Interest Rate Concerns Continue To Weigh On Wall Street

After coming under pressure early in the session, stocks remain mostly lower in afternoon trading on Wednesday. While the Dow has climbed well off its worst levels and briefly turned positive, the tech-heavy Nasdaq continues to post a steep loss.

Currently, the Nasdaq is down 129.43 points or 1.0 percent at 13,537.86 and the S&P 500 is down 14.95 points or 0.3 percent at 4,373.76. The narrower Dow is down 21.36 points or 0.1 percent at 34,032.51, with strong gains by UnitedHealth (UNH) and Chevron (CVX) limiting the downside for the blue chip index.

Concerns about the outlook for interest rates contributed to the early weakness on Wall Street following remarks by Federal Reserve Chair Jerome Powell.

In testimony before the House Financial Services Committee, Powell reiterated the Fed is likely to continue raising interest rates in an effort to contain stubbornly elevated inflation.

“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell said.

The Fed left rates unchanged last week, but the central bank’s latest projections suggest it plans to resume raising rates later this year, forecasting a rate of 5.6 percent by the end of 2023.

If the Fed decided to revert to its recent quarter-point increases, the forecast suggests the central bank will raise rates two more times this year.

The forecast for additional rate hikes come as Powell noted inflation pressures continue to run high and said the process of getting inflation back to the Fed’s 2 percent target has a “long way to go.”

Following Powell’s remarks, CME Group’s FedWatch Tool is indicating a 76.9 percent chance the Fed will raise rates by another quarter point following its next meeting in late July.

Sector News

Semiconductor stocks continue to significant weakness on the day, with the Philadelphia Semiconductor Index tumbling by 2.9 percent.

The index continues to give back ground after ending last Wednesday’s trading at its highest closing level in over year.

Software, networking and computer hardware stocks have also shown notable moves to the downside, contributing to the steep drop by the tech-heavy Nasdaq.

On the other hand, energy stocks are seeing considerable strength after falling sharply on Tuesday, benefiting from a rebound by the price of crude oil.

With crude for August delivery jumping $1.30 to $72.49 a barrel, the Philadelphia Oil Service Index is up by 1.6 percent and the NYSE Arca Oil Index is up by 1.4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday. China’s Shanghai Composite Index slumped by 1.3 percent and Hong Kong’s Hang Seng Index plunged by 0.9 percent, although Japan’s Nikkei 225 Index bucked the downtrend and rose by 0.6 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index slid by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries have climbed back near the unchanged line after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 3.732 percent.

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