US stocks were lower early Monday morning after investors expressed concerns about future measures from the Fed.
Traders fear that aggressive rate hikes this year by the Fed and central banks in Europe and Asia to contain inflation, which has been at the highest level for decades, could derail global economic growth.
“The Fed is still feeling inflation. Its actions haven’t even begun to dent inflationary pressures,” ACY Securities’ Clifford Bennett said in a report. “They haven’t even started to curb economic activity at all. The economic slowdown already played a role for other reasons.”
US stocks fell Friday, closing the week lower and posting a four-week gain for the S&P 500, as investors wondered how aggressively the Federal Reserve will have to act to tame inflation.
The market went through a series of jerky moves as traders reassessed their bets on what the Fed might do at its September meeting. For weeks, many investors were confident that inflation may have peaked and that the central bank would moderate the size of its future rate hikes.
But comments from central bank officials in recent days, coupled with the release of the minutes from the Fed’s July meeting, brought back the possibility of continued aggressive rate hikes.
On Thursday, James Bullard, president of the Federal Reserve Bank of St. Louis, said he would aim for a 0.75 percentage point increase in September.
“This feels like a re-evaluation of whether there has been enough financial tightening,” said John Roe, head of multi-asset funds at Legal & General Investment Management. “And if not, can we get more pain from central banks that need to do more?”
The S&P 500 fell 55.26 points, or 1.3%, to 4228.48 and fell 1.2% for the week. The Dow Jones Industrial Average fell 292.30 points, or 0.9%, to 33706.74 and lost 0.2% for the week. The Nasdaq Composite fell 260.13 points, or 2%, to 12705.22 and fell 2.6% for the week.
Technology stocks had some of the biggest losses. Microsoft fell 1.4%.
Retailers, banks and communication companies also fell. Next week, central bankers will meet in Jackson Hole, Wyo., for the Federal Reserve Bank of Kansas City’s annual economic policy symposium.
Traders will be watching officials’ speeches closely to gain insight into how the Fed is thinking.
Meanwhile, Shanghai moved forward after the Bank of China lowered its target five-year loan rate to support weak home sales. Tokyo, Hong Kong, Seoul and Sydney withdrew.
The Shanghai Composite Index rose 0.5% to 3,272.89 while the Nikkei 225 in Tokyo fell 0.5% to 28,794.79. The Hang Seng in Hong Kong lost less than 0.2% to 19,743.12 points. South Korea’s Kospi lost 1.2% to 2,462.03 and Sydney’s S&P ASX-200 fell 0.9% to 7,051.70. The Indian Sensex opened 1.1% lower and fell to 58,992.24. New Zealand and Singapore advanced, while Bangkok and Jakarta fell.