Wall Street ends sharply lower on fears of aggressive Fed

By Noel Randewich and Bansari Mayur Kamdar

(Reuters) – Wall Street ended sharply lower on Monday as investors fretted about a U.S. Federal Reserve gathering later this week in Jackson Hole, Wyoming, that is expected to reinforce a strong commitment by the central bank to stamp out inflation.

All 11 S&P 500 sector indexes declined, led lower by consumer discretionary, down 2.84%, followed by a 2.78% loss in information technology.

Nvidia Corp dropped 4.6% and Amazon.com Inc fell 3.6%, while Microsoft Corp and Apple Inc each lost more than 2% as the benchmark 10-year U.S. Treasury yield rose to its highest since July 21. [US/]

Technology and other higher-growth stocks often fall when bond yields rise.

After a summer rally on Wall Street ended last week, the S&P 500 remains down about 13% so far in 2022, and the Nasdaq is down more than 20%.

The CBOE Volatility index, Wall Street’s fear gauge, rose to 23.9, its highest in over two weeks.

Focus is on Fed Chair Jerome Powell’s speech on Friday at the central banking conference in Jackson Hole for further cues on how aggressively the Fed is likely to be with future interest rate hikes.

“Powell is going to try to sound hawkish to tamp down inflationary expectations and tighten financial conditions. So that’s most likely going to be a negative catalyst for the market,” warned Jay Hatfield, chief investment officer at Infrastructure Capital Management in New York.

The Fed will probably raise interest rates by 50 basis points in September, according to economists polled by Reuters.

However, traders are split between a 50 bps hike and a 75 bps hike by the central bank after several policymakers recently pushed back against expectations of a dovish pivot and emphasized the Fed’s commitment to fight against inflation. [FEDWATCH]

Investors will also be looking for details on the Fed’s plans to reduce its nearly $9 trillion balance sheet, a process that started in June.

The S&P 500 declined 2.14% to end the session at 4,137.99 points.

The Nasdaq declined 2.55% to 12,381.57 points, while Dow Jones Industrial Average declined 1.91% to 33,063.61 points.

Slowdown fears hit markets globally. China’s central bank trimmed some key lending rates on Monday in a bid to support a slowing economy and a stressed housing sector.

Also bleeding into negative sentiment on Wall Street, European shares dropped after Russia’s Gazprom said last week it would halt natural gas supplies to Europe for three days at the end of August.

AMC Entertainment Holdings Inc tumbled 42% after the cinema chain’s preferred stock listing started trading and its UK-based rival Cineworld Group warned of a possible bankruptcy filing.

Signify Health Inc surged 32% following a report on Sunday that UnitedHealth Group Inc, Amazon, CVS Health Corp and Option Care Health Inc were bidding to acquire the company.

Declining stocks outnumbered rising ones within the S&P 500 by a 19.9-to-one ratio.

The S&P 500 posted one new high and 32 new lows; the Nasdaq recorded 30 new highs and 171 new lows.

Volume on U.S. exchanges was relatively light, with 9.9 billion shares traded, compared with an average of 10.8 billion shares over the previous 20 sessions.

(Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Marguerita Choy)