Stock Market Today-8/22: Stocks Slip on Growth, Inflation Worries

Updated 4:15 PM EST

Stocks fell on Monday as the dollar extended its best weekly gain in more than two years as investors adopted a defensive tone ahead of a crucial week for the Fed amid fears that soaring inflation could continue to cripple the outlook. growth in the world’s largest economies.

An energy crisis in Europe, which threatens to turn the region into recession as the cost of living rises, as well as the damage to the world’s second-largest economy from China’s ‘zero Covid’ health policies, have added to sentiment. gloomy investors.

China, which slashed its benchmark 1-month prime lending rate last night in its latest effort to revive growth, is nearing contraction as factory activity slows amid new pockets of infections in key cities. This is on top of supply chain disruptions in everything from semiconductors to toys to apparel and footwear, which in turn is increasing price pressures for importers and accelerating fears. inflation as the winter months approach.

Wall Street’s decline last week, which ended a four-game winning streak, reflects not only concern over faster short-term inflation, but also uncertainty over a global slowdown – which will complicate likely the path of Fed rates by the end of the year.

Data from the Fed’s favorite gauge of inflation, the PCE price index, will be released at 8:30 a.m. Friday, with a second estimate of second-quarter GDP growth expected at the same time Thursday.

At present, investors are divided on the size of the Fed’s rate hike in September, with bets on a 50 basis point move standing at around 49.5% and the chances of a rise. 75 basis points set at 50.5% ahead of Chairman Jerome Powell’s keynote speech at the Jackson Hole symposium later this week.

Powell’s speech, at 10:00 a.m. EST on Friday, August 26, will likely give the Fed chairman a chance to cement the central bank’s thinking on approaching interest rate hikes. fall months as betting on a 75 basis point move in September continues. fade – even as policymakers insist that inflation remains their top concern when it comes to the economy’s ability to resume its full swing.

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The dollar index, which tracks the greenback against a basket of six global currencies, rose 0.8% to 108.918 in New York, extending last week’s 1.2% gain and leading the benchmark forex at a range close to a 20-year high. .

Benchmark 10-year bond yields, which move in the opposite direction to prices, rose 8 basis points from yesterday to 3.029%, while 2-year bonds were pegged at 3.32%.

WTI crude futures for September delivery were 10 cents lower at the start of New York, trading at $90.67 a barrel, while the Automobile Association of America pegged domestic prices for the oil. U.S. gasoline at $3.905 a gallon, extending a 63-day streak of declines and pushing prices back to the lowest levels since late February.

European stocks fell amid hawkish comments from Joachim Nagel, the head of Germany’s Bundesbank, who said the European Central Bank will not be swayed by economic weakness as it raises rates to fight inflation fastest in over 25 years.

Europe’s benchmark Stoxx 600 index fell 0.96% at the close of trading in Frankfurt, following a 0.95% drop in the MSCI regional index ex-Japan in Asia.

On Wall Street, the S&P 500 ended down 2.14%, while the Dow Jones Industrial Average fell 643 points, or 1.91%, to 33,063. The tech-focused Nasdaq lost 2.55%.

AMC Entertainment (CMA) Shares fell 42% after the cinema chain’s biggest rival, Cineworld, confirmed it was considering a Chapter 11 bankruptcy filing in the United States.

AMC shares were also hurt by the distribution of preferred stock, which will trade on the New York Stock Exchange under the symbol APE, which has the potential to dilute common stockholders if converted at some point in the future.

Bed, bath and beyond (BBBY) Shares extended their decline on Monday, taking the stock favorite even to three-week lows, as investors continue to exit the struggling home goods retailer following the $60 million sale of last week by activist investor Ryan Cohen. Shares ended down 16.2%

Adidas S.A. (ADDYY) shares fell 5.2% after sportswear group and global Nike (NKE) rival, said CEO Kasper Rorsted will leave the company next year.

James T. Quintero