On Monday, Wall Street closed sharply lower with investors fretting about the gathering of the US Federal Reserve scheduled in Jackson Hole, Wyoming later this week.
The conference is expected to reiterate the strong commitment of the US Fed to curb the stubborn inflation in the country.
Indexes fall
There was a decline in all 11 sectors of the benchmark S&P 500 index, with consumer discretionary stocks leading losses by 2.84%, followed by information technology which recorded losses of 2.78%.
There was a 4.6% drop in Nvidia Corp and a 3.6% decline in Amazon.com Inc., while Apple Inc. and Microsoft Corp both lost more than 2%.
Meanwhile, the benchmark 10-year government bond yields climbed to their highest since July 21st. When bond yields go up, high-growth stocks like tech usually fall.
Last week, a summer rally came to an end on Wall Street and the S&P 500 has suffered losses of about 13% so far in 2022, while the Nasdaq has shed about 20% in the year.
Called the fear gauge of Wall Street, the CBOE Volatility Index climbed to its highest of 23.9 in more than two weeks.
The Fed
The focus will now be on Friday’s speech of the chairman of the US Federal Reserve, Jerome Powell, at the central banking symposium.
It is expected to provide further cues about how aggressive the US central bank will increase interest rates in the future.
Market analysts said that the Fed chair is likely to sound hawkish because their goal is to curb inflationary expectations and for tightening financial conditions.
Therefore, the meeting is expected to be a negative catalyst for the financial markets. Economists have already predicted an interest rate hike of about 50 basis points in September.
But, traders are divided between a 50 and 75 basis points increase, as a number of policymakers recently dashed investor hopes of a dovish stance and reiterated their commitment to combat inflation.
Apart from that, investors will also be looking for hints about the Fed’s plan for reducing its balance sheet, which is worth $9 trillion, something it began in June.
Market performance
There was a 2.14% decline in the S&P 500, which closed the session at 4,137.99 points. There was also a 2.55% drop in the Nasdaq, which brought it down to 12,381.57 points.
A 1.91% drop brought the Dow Jones Industrial Average down to 33,063.61 points. Global markets have taken a hit over fears of a slowdown.
The central bank of China also trimmed some of its key lending rates on Monday in order to support a slowing economy and a property sector that is highly stressed.
The sentiment was also negative on Wall Street after a decline in European shares because of the announcement of Russian Gazprom about shutting down Nord Stream 1 for maintenance.
A 42% drop was also seen in AMC Entertainment Holdings Inc. after the preferred stock of the cinema chain began trading and its UK competitor, Cineworld warned of a bankruptcy filing in the US.