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Saturday, September 24, 2022

Stocks extend losses for week with Fed ‘happy’ about market sell-off

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U.S. equity markets retreated for a third straight week after jobs data did little to alter views that the Federal Reserve will remain intent on policy tightening.

The S&P 500 index dropped 3.3 percent to 3,924 on the week. The Dow Jones industrial average fell 3 percent in the five-day period, while the Nasdaq plunged 4.2 percent.

Friday’s non-farm payrolls report revealed that employers added 315,000 jobs in August. The unemployment rate rose for the first time since January to 3.7 percent as the participation rate jumped. And monthly wage growth slowed, indicating that some inflation pressures are cooling.

The solid jobs report provided evidence that the economy might be able to withstand additional Fed rate hikes to get inflation back down to its 2 percent target. At the same time, the week saw another round of corporate belt-tightening. Amazon plans to abandon dozens of existing and planned delivery facilities around the United States, according to a consulting firm. Snap announced it will lay off about 20 percent of its workforce. Bed Bath & Beyond said it would slash 20 percent of its management and supply-chain roles and close about 150 stores in a bid to cut costs.

Minneapolis Fed President Neel Kashkari said on Bloomberg’s “Odd Lots” podcast that he was “happy” to see the recent market sell-off, as it confirmed that investors are taking the central bank’s inflation fight seriously.

“It really was a rougher week in the U.S. equity market and it’s really on the back of more uncertain sentiment as we continue to wait out and see how long the Fed is going to remain in this restrictive stance,” said Lisa Erickson, senior vice president and head of the public markets group at U.S. Bank Wealth Management.

Semiconductor firms reported mixed earnings results. Nvidia fell 16 percent — its largest weekly decline since November 2018 — after the chip supplier gave a disappointing sales forecast and warned of U.S. efforts to restrict exports to China. In contrast, Broadcom, which sells a wider range of chips, provided a strong sales forecast.

Markets will be closed Monday in observance of Labor Day. On Wednesday, the Fed’s “beige book” could reveal signs of regional economic slowdowns. And Fed Chair Jerome H. Powell is scheduled to take part in a discussion on monetary policy at the Cato Institute in Washington on Thursday.

The Treasury will sell 13-, 26- and 52-week bills Tuesday. They yielded 2.977 percent, 3.376 percent and 3.501 percent in when-issued trading, respectively. It will auction four- and eight-week bills Thursday.

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