Stocks on Wall Street suffered significant losses for the second consecutive day on Tuesday, with investors closely monitoring the Federal Reserve’s stance on interest rates. The market downturn was highlighted by a 1.2% decline in the S&P 500 (^GSPC), a 330 points drop (1.0%) in the Dow Jones Industrial Average (^DJI), and a 1.2% decrease in the tech-heavy Nasdaq Composite (^IXIC). While the week began with positive gains, the prospects for the month are now veering towards a downward trend.
Federal Reserve policymaker Neel Kashkari’s comments on Monday sent shockwaves through the market. Kashkari indicated that, given the surprising resilience of the US economy, the central bank was leaning towards raising interest rates and maintaining them at elevated levels to combat inflation. The notion of “higher for longer” interest rates immediately weighed on market sentiment.
Adding to the growing unease, the 10-year Treasury yield (^TNX) approached levels not seen since 2007, contributing to the US dollar reaching a 10-month peak. The looming threat of a government shutdown exacerbated concerns as Moody’s warned that it could negatively impact the US credit rating. With just days remaining before the September 30 deadline to reach a budget agreement, historical precedent suggests that a protracted standoff in Congress could have detrimental effects on stock markets.
Despite the prevailing gloom, investors found some relief in this week’s economic and business data releases. Thursday promises an update on US second-quarter GDP, while Friday offers a fresh reading on PCE inflation, which serves as the Federal Reserve’s preferred measure. These forthcoming data points will be closely scrutinized by market participants.
At the close of trading on Tuesday, The S&P 500 (^GSPC) fell 1.2%, the Dow Jones (^DJI) dropped around 330 points (1.0%), and the Nasdaq Composite (^IXIC) also slid 1.2%. The three major stock indices moved further away from the record highs achieved in August, reflecting growing uncertainty among investors. Market participants are expected to closely monitor developments not only related to the Federal Reserve’s monetary policy decisions but also the ongoing negotiations surrounding the US government budget.
Source: Yahoo Finance
