Wall Street’s main indexes tumbled more than 1% on Monday in a dour start to the week as investors worried about hawkish signals from Federal Reserve policymakers against the backdrop of slowing economic growth.
All the 11 major S&P 500 sectors declined in early trading, with rate-sensitive information technology, consumer discretionary and communication services stocks among the top losers.
High-growth companies such as Apple Inc and Tesla Inc fell 1.4% and 2.4%, respectively.
A four-week summer rally for the Nasdaq and the S&P 500 snapped last week after growth stocks tumbled as the benchmark 10-year Treasury yield hit nearly 3% on inflation fears.
Banks fell 2.1% on Monday, with lenders JPMorgan Chase & Co and Bank of America down nearly 2% each.
Banking giants collectively face more than $1 billion in regulatory fines for employees’ use of unapproved messaging tools, including email and apps such as WhatsApp.
The CBOE Volatility index, Wall Street’s fear gauge, rose to 23.26, its highest level in over two weeks.
Hopes of a dovish pivot by the Fed and strong quarterly earnings helped the benchmark S&P 500 rebound nearly 14.5% from its mid-June lows after a rough start to the year.
Focus this week is on Fed Chair Jerome Powell’s speech at a central banking conference in Jackson Hole on Friday for further cues on the monetary policy tightening path.
“The market convinced itself that the CPI last month suggested peak inflation has been reached … but that was short sighted,” said Kenny Polcari, managing partner at Kace Capital Advisors.
“Jackson Hole will give Powell an opportunity to reset the narrative and suggest the Fed is going to remain vigilant and aggressive.”
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The Fed will raise rates by 50 basis points (bps) in September, according to economists polled by Reuters.
Traders are also expecting a slightly higher chance of a 50 bps hike over a third 75 bps hike, even as several policymakers have pushed back against expectations of a dovish pivot and emphasized the fight against inflation.