Wall Street slides ahead of key Federal Reserve Chair Jerome Powell’s speech

US stocks weakened on Thursday, August 22, due to the upcoming speech by Federal Reserve Chair Jerome Powell on Friday, August 23.

The S&P 500 fell by 0.9% after a two-week rally. The Dow Jones Industrial Average dropped by 177 points, or 0.4%, and the Nasdaq composite dipped by 1.7%.

Stocks fell as Treasury yields increased pressure in the bond market following some mixed data on the US economy. The economy has been slowing due to high interest rates meant to control inflation.

According to a report, slightly more US workers applied for unemployment benefits last week than expected. The number is still low relative to history, but it gives a signal that the job market continues to cool.

Another report showed a dual picture of business activity in the US. Growth for services businesses is improving, according to preliminary data from S&P Global Market Intelligence. However, the country’s manufacturing sector appears to be contracting at a more severe rate.

The data suggested the US economy is still growing but pointed to some fragility.

That’s why there is so much attention on Federal Reserve’s speech today as Powell is expected to give clues about how quickly and deeply the Fed may cut rates to ease economic conditions.

One of the consequence of expectations for coming cuts going overboard among investors, something that has frequently happened historically, could result drop in Treasury yields since the spring. The drop has helped pull mortgage rates lower, which in turn helped sales of previously occupied homes after a four-month slide in July.

In the meantime, US companies continue to report mostly better-than-expected profits for the springtime.

Internet-connected exercise company Peloton soared 35.4% after it topped sales forecasts and lost less money in the latest quarter than analysts were expecting. It achieved modest revenue growth for the first time in more than two years.

Another winner of the pandemic good growth which weakened later was Zoom Video Communications, which also rose following its profit report. 

But more stocks fell on Wall Street than rose, including Nvidia, which was the heaviest single weight on the S&P 500. It erased an early gain to fall 3.7% ahead of its own highly anticipated profit report coming next week.

Also on the losing side of Wall Street was Snowflake, which fell 14.7% despite topping analysts’ expectations  in the latest quarter. 

Advance Auto Parts tumbled 17.5% after its profit for the latest quarter came up short of Wall Street’s expectations. It cited a “challenging demand environment” and cut its forecast for profit over the full year well below what Wall Street was expecting.

Overall, the S&P 500 fell 50.21 points to 5,570.64. The Dow dropped 177.71 to 40,712.78, and the Nasdaq lost 299.63 to 17,619.35.

In the bond market, the yield on the 10-year Treasury rose to 3.86% from 3.80% late Wednesday, August 21.

In stock markets abroad, indexes made mostly modest moves across Asia and Europe. South Korea’s Kospi rose 0.2% after the Bank of Korea decided at its monetary policy meeting to keep rates unchanged. Hong Kong’s Hang Seng was an outlier and jumped 1.4%.

(With inputs from AP)

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First Published:

23 Aug 2024, 12:48 PM IST