S&P 500, NASDAQ Composite Fall Fourth Straight Day as Investors Shed Riskier Bets

The NASDAQ Composite led Wall Street lower on Monday for a fourth consecutive session as investors liquidated riskier assets on worries that the Federal Reserve’s tightening campaign could push the U.S. economy into a recession.

On Monday, the blue chip Dow Jones Industrial Average settled at 32757.54, down 162.92 or -0.49%. The benchmark S&P 500 Index finished at 3817.66, down 34.70 or -0.90% and the tech-weighted NASDAQ Composite closed at 10546.03, down 159.38 or -1.49%.

Selling Fueled by Powell’s Hawkish Tone

The S&P 500 Index along with the NASDAQ Composite and Dow Jones Industrial Average have been selling off since last Wednesday, when Fed Chairman Jerome Powell sent a hawkish message to investors shortly after the central bank raised its benchmark interest rate 50 basis points.

Powell promised future rate advances even as data showed signs of a weakening economy. Last Friday, three Fed speakers went a step further and said rates could even exceed the Fed’s current terminal rate target of 5.1%.

At their current prices, the three major stock indexes are in a position to post their biggest annual declines since the 2008 financial crisis.

Treasury Yields Rise as Investors Assess Monetary Policy, Economic Outlook

A rise in U.S. Treasury yields pulled investors from stocks as they sought protection in the form of safer bets against the likelihood of a recession in 2023.

Treasury yields rose on Monday as investors continued to assess the outlook for the economy and monetary policy, after laws week’s hawkish comments from the U.S. Federal Reserve

S&P 500 Sectors Take a Hit

The biggest decliners among S&P industry sectors were communications services, which fell 2.2%, consumer discretionary, down 1.7% and technology, which lost 1.4%. Energy outperformed, closing up 0.13% as the sole industry out of 11 to manage a gain.

Tech Market Giants Weigh on the NASDAQ Composite

Market heavyweights such as Apple Inc, Microsoft Corp and Amazon.com Inc created some of the biggest drags on the market. Tesla and Meta Platforms also grabbed the headlines.

Trading in Tesla Inc was volatile with the electric carmaker closing down 0.24% after falling as much as 2.8% during the session. This was after a Twitter poll that showed a majority of respondents want Tesla Chief Executive Elon Musk to step down as CEO of the social media platform. Tesla was also downgraded before the opening on the premise that Musk’s acquisition of Twitter has become a distraction.

Meta Platforms shares finished down 4.1% after the European Commission said it could impose a fine of up to 10% of the tech conglomerate’s annual global turnover if evidence showed an infringement of the EU’s antitrust laws, Reuters reported.

Short-Term Outlook

The lack of big earnings reports or economic data this week likely intensified investors’ focus on Powell’s comments on the direction of interest rates and other economic fears.

Besides having to deal with below average pre-holiday volume, traders continue to worry about whether the Fed is acting appropriately, whether there will be a recession and it so, will the landing be hard or soft.