U.S. Stocks Under Pressure In Reaction To Powell Comments

After moving mostly lower early in the session, stocks have fluctuated over the course of the trading day on Monday. The major averages have bounced back and forth across the unchanged line following the strong upward move seen last week.

The major averages have shown a significant move to the downside in recent trading, falling to new lows for the session. The Dow is down 395.24 points or 1.1 percent at 34,359.69, the Nasdaq is down 201.38 points or 1.5 percent at 13,692.46 and the S&P 500 is down 36.72 points or 0.8 percent at 4,426.40.

Stocks recently came under pressure in reaction to comments from Federal Reserve Chair Jerome Powell, who suggested the central bank might raise interest rates more aggressively if inflation remains too high.

“We will take the necessary steps to ensure a return to price stability,” Powell said in remarks to the National Association for Business Economics. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

He added, “And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

The comments from Powell come after the Fed raised interest rates by 25 basis points last week and signaled more rate hikes are likely in the coming months.

The pullback on Wall Street also reflects profit taking, as lingering concerns about the Russia-Ukraine conflict and higher oil prices inspire some traders to cash in on last week’s gains.

Last week, the major averages had their best week since November 2020. The Nasdaq soared by 8.2 percent, while the S&P 500 and the Dow spiked by 6.2 percent and 5.5 percent, respectively.

The rally seen last week helped lift the major averages well off their recent lows, although they also remain well off their record highs.

Traders are also keeping an eye on the latest developments in Ukraine, with peace talks with Russia failing to make substantial progress on key issues.

Sector News

Housing stocks have moved sharply lower after turning in a strong performance last week, resulting in a 2.6 percent slump by the Philadelphia Housing Sector Index.

Significant weakness is also visible among tobacco stocks, with the NYSE Arca Tobacco Index tumbling by 2.6 percent.

Airline stocks also continue to see considerable weakness, as reflected by the 2.1 percent drop by the NYSE Arca Airline Index.

Retail, semiconductor and biotechnology stocks have also shown notable moves to the downside, while energy stocks are moving sharply higher along with the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with the Japanese markets closed on the day. While China’s Shanghai Composite Index inched up by 0.1 percent, Hong Kong’s Hang Seng Index slid by 0.9 percent.

The major European markets also turned mixed on the day. While the U.K.’s FTSE 100 Index rose by 0.5 percent, the German DAX Index and the French CAC 40 Index both fell by 0.6 percent.

In the bond market, treasuries have pulled back sharply following the rebound seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 14.7 basis points at 2.295 percent.

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