S&P 500 and Nasdaq close lower for second day as investors weigh on interest rate hike outlook
Stocks fell on Thursday and bond yields jumped as Federal Reserve officials signaled their campaign to hike rates to curb inflation was far from over.
The Dow Jones Industrial Average slipped 7.51 points, or 0.02%, to 33,546.32 – after falling 314 points during the session. The S&P 500 fell 0.31% to 3,946.56. The Nasdaq Composite fell 0.35% to 11,144.96.
Stocks rebounded from lows hit earlier in the day as shares of Cisco Systems jumped nearly 5%. The networking gear company beat expectations in its fiscal first quarter report and issued an upbeat forecast. Other technology stocks such as Apple and Intel also rose.
Investors weighed comments from St. Louis Federal Reserve Chairman James Bullard, who said in a speech Thursday that “the key rate is not yet in a zone that can be considered sufficiently restrictive.”
“The change in monetary policy stance appears to have had only limited effects on observed inflation, but market prices suggest disinflation is expected in 2023,” Bullard added.
The policy-sensitive 2-year Treasury yield jumped to 4.45% on Thursday, raising fears that higher rates could push the economy into a recession.
“I’m looking at a labor market that’s so tight, I don’t know how you keep bringing that level of inflation down without having a real slowdown, and maybe we even have a contraction in the economy to get there. Kansas City Fed Chair Esther George told The Wall Street Journal on Wednesday.
Stocks vulnerable to a recession were among the notable losers in the S&P 500. Materials stocks fell, as did consumer discretionary names.
“Additional monetary tightening and the cumulative impact of this year’s rate hikes suggest that recession risks remain elevated,” UBS Global Wealth Management chief investment officer Mark Haefele wrote in a note. “We continue to believe that the macroeconomic preconditions for a sustained recovery – that interest rate cuts and a trough in growth and corporate earnings are on the horizon – are not yet in place.”