NEW YORK: Wall Street’s main indexes fell on Wednesday, with the Nasdaq leading declines, as Federal Reserve Chair Jerome Powell struck a hawkish tone in his congressional testimony, while Tesla fell the most among megacap stocks.
Powell told lawmakers that the central bank was undeterred from its goal to bring inflation down to the 2% target and, despite a recent pause in rate hikes, officials were in agreement borrowing costs would likely still need to move higher.
A majority of money market participants expect only one rate hike of 25 basis points in July by the central bank for the rest of the year, according to CMEGroup’s Fedwatch tool.
“We just ran too far, too fast and comments from Powell spooked the market because he doesn’t come off as he’s done,” said Dennis Dick, market structure analyst at Triple D Trading.
“The market would really like the Fed to indicate that (the rate-hike cycle) is closer to the end than what (Powell) indicated today.” Megacap companies came under pressure as yields on the two-year and 10-year treasury notes, which move in line with interest rate expectations, rose marginally after Powell’s comments.
Tesla fell 4.2% after Barclays downgraded the EV maker to “equal weight” from “overweight.” Five out of the top 11 S&P 500 sectors fell, with the rate-sensitive tech sector dropping 1.7% to over a week’s low.
Following a tech-induced rally over the past few weeks, Wall Street’s top indexes fell as investors booked profits amid worries of weakening global demand.
Still, the benchmark S&P 500 has advanced around 14% so far this year and the CBOE market volatility index is hovering near pre-pandemic lows.
FedEx, seen as a US economic bellwether, slipped 1.2% after posting a decline in quarterly earnings.
At 12:05 p.m. ET, the Dow Jones Industrial Average was up 2.35 points, or 0.01%, at 34,056.22, the S&P 500 was down 17.73 points, or 0.40%, at 4,370.98, and the Nasdaq Composite was down 166.74 points, or 1.22%, at 13,500.55.
Meanwhile, Goldman Sachs said if a US recession becomes more likely, investors should maintain upside exposure to equities by using options to hedge a potential 23% fall in the S&P 500 index.
Crypto firms, including Coinbase, Riot Platforms, Marathon Digital and Bit Digital, rose between 2.6% and 9%, tracking an uptick in bitcoin prices, which hit their highest levels in more than two months.
Declining issues outnumbered advancers for a 1.06-to-1 ratio on the NYSE and a 1.61-to-1 ratio on the Nasdaq.
The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 55 new highs and 91 new lows.