U.S. Stocks Extend Sell-Off Amid Interest Rate Concerns

After extending last Friday’s sell-off to start the week, stocks showed another significant move to the downside during trading on Tuesday. The major averages all moved notably lower, ending the session at their worst levels in a month.

The major averages climbed off their lows of the session in late-day trading but remained firmly negative. The Dow slumped 308.12 points or 1 percent to 31,790.87, the Nasdaq plunged 134.53 points or 1.1 percent to 11,883.14 and the S&P 500 tumbled 44.45 points or 1.1 percent to 3,986.16.

The extended sell-off by stocks reflected lingering concerns about the outlook for interest rates and the impact further rate hikes will have on the economy.

Stocks have been under pressure since Federal Reserve Chair Jerome Powell indicated the central bank plans to continue aggressively raising interest rates during a speech last Friday.

Powell suggested that even after the Fed finishes tightening monetary policy, rates will remain at higher levels to ensure inflation remains contained.

“Stocks turned negative after confidence and job opening data supported the argument for the Fed to stick to an aggressive stance with fighting inflation,” said Edward Moya, senior market analysts and OANDA.

“It seems like traders are leaning towards a 75 bp hike in September, a half-point in November and a 25bp increase in December,” he added. “Over the next few months, if the labor market doesn’t break and the consumer remains resilient, Wall Street might start pricing in rate hikes for February and March.”

The Conference Board released a report this morning showing consumer confidence rebounded by more than expected in the month of August.

The Conference Board said its consumer confidence index jumped to 103.2 in August from a downwardly revised 95.3 in July.

Economists had expected the consumer confidence index to climb to 97.4 from the 95.7 originally reported for the previous month.

A separate report from the Labor Department showed the number of job openings was little changed at 11.2 million on the last business day of July

Sector News

Energy stocks saw substantial weakness after bucking the downtrend in the previous session, with a steep drop by the price of crude oil weighing on the sector.

Crude for October delivery is currently plunged $5.37 to $91.64 a barrel a barrel after spiking $3.95 to $97.01 a barrel on Monday.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 4.8 percent, the NYSE Arca Oil Index dove by 3.6 percent and the NYSE Arca Natural Gas Index slumped by 3.4 percent.

Substantial weakness was also visible among steel stocks, as reflected by the 3.8 percent nosedive by the NYSE Arca Steel Index.

Gold, computer hardware and transportation stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index jumped by 1.1 percent, while China’s Shanghai Composite Index fell by 0.4 percent.

The major European markets also finished the day mixed. While the German DAX Index rose by 0.5 percent, the French CAC 40 Index edged down by 0.2 percent and the U.K.’s FTSE 100 Index slid by 0.9 percent.

In the bond market, treasuries showed a lack of direction before ending the session roughly flat. The yield on the benchmark ten-year note, which moves opposite of its price, ended the day unchanged at 3.110 percent.

Looking Ahead

A report on private sector employment may attract attention on Wednesday, as traders look ahead to the Labor Department’s more closely watched monthly jobs report on Friday.

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