Wall St drops as megacaps weigh amid Fed rate debate
Wall Street’s main indexes fell on Monday, with shares of Apple and other megacaps falling, while investors prepared this week for a massive rate hike from the Federal Reserve and the path to future interest rates. assessed.
The US Fed is set to meet on Tuesday and Wednesday, where policymakers are expected to deliver a fourth straight 75-basis point interest rate hike to stave off decades of high inflation.
Communications from Fed officials following the decision this week, as well as non-farm payroll data, will provide further clues on whether the central bank may ease its aggressive stance on interest rates in the future.
Apple Inc fell 2.1 percent in early trade. A Reuters report said production of its iPhones could drop by as much as 30% next month due to the tightening of COVID-19 restrictions in China.
Shares of other megacaps including Amazon.com, Google’s owner Alphabet, and Microsoft and Meta Platforms were down between 0.8% and 3%.
Among the sectors, information technology and communication services were the major losers with a decline of 1.6% and 1.9%, respectively.
A less hawkish Fed as well as better-than-expected earnings expectations from companies outside the technology sector propelled the S&P 500 and Nasdaq to their second straight week of gains on Friday.
After two consecutive months of decline, both the indices are set to register gains in October. Meanwhile, the Dow Jones could see its biggest monthly increase in four decades based on the day’s movement.
“You have a simultaneous convergence of the labor market and the Fed, and so that should make it a very questionable market week in terms of direction,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“We’ll hear from Fed Chair Powell on Wednesday and his words probably mean more than his actions. If his tone, if his language starts to moderate somewhat, it will remain positive for stocks.”
Traders are almost equally divided on expectations of the Fed’s short interest rate hike at its next policy meeting, a 50 basis point rate increase from 47.9% in December, according to CME Group’s FedWatch tool.
Along with the Fed, the US midterm elections will also set the tone for the markets in November.
At 10:14 a.m., the Dow Jones Industrial Average was down 184.99 points, or 0.56%, at 32,676.81, the S&P 500 was down 33.15 points, or 0.85%, at 3,867.91, and the Nasdaq Composite was down 145.57 points, or 1.31. %, at 10,956.88.
The number of issues declined to a 1.65-to-1 ratio on the NYSE and a 1.56-to-1 ratio on the Nasdaq.
The S&P index recorded 10 new 52-week highs and five new lows, while the Nasdaq recorded 63 new highs and 47 new lows.
Among singles stocks, TuSimple Holdings fell 45% after the trucking firm terminated its chief executive officer.
The US Fed is due to meet on Tuesday and Wednesday, where policymakers are expected to secure a fourth straight 75-point interest rate hike to curb decade-high inflation.
Communications from Fed officials after the decision, as well as this week’s nonfarm payrolls data, will offer further clues as to whether the central bank might ease its aggressive stance on interest rates going forward.
Apple Inc (NASDAQ: ) fell 2.1% in early trading. A Reuters report said production of its iPhones could drop by as much as 30% next month due to tightening of COVID-19 restrictions in China.
Shares of other megacaps including Amazon.com (NASDAQ: ), Google owner Alphabet (NASDAQ: ) and Microsoft (NASDAQ: ) and Meta Platforms fell between 0.8% and 3%.
Among the sectors that decreased the most, information technology and communication services decreased by 1.6% and 1.9%, respectively.
Hopes for a less hawkish Fed, as well as better-than-expected earnings from companies outside the technology sector, led to a second straight week of gains on the stock market and the Nasdaq on Friday.
Both indexes are also set for record gains in October after two straight months of decline. The Dow Jones, meanwhile, could post its biggest monthly gain in more than four decades, depending on the day’s moves.
“You have the convergence of the labor market and the Fed together, so it should be a very contentious market week in terms of direction,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.