U.S. Stocks Move Sharply Lower Amid Concerns About Interest Rate Outlook

Stocks have moved sharply lower during trading on Monday, extending the steep drop seen in the previous session. The major averages have all shown significant moves to the downside.

In recent trading, the major averages have fallen to new lows for the session. The Dow is down 409.90 points or 1.2 percent at 33,296.84, the Nasdaq is down 226.30 points or 1.8 percent at 12,478.92 and the S&P 500 is down 64.14 points or 1.5 percent at 4,164.34.

Concerns about the outlook for interest rates have contributed to the weakness on Wall Street ahead of this week’s economic symposium in Jackson Hole, Wyoming.

In a research note, Chris Senyek, chief investment strategist at Wolfe Research, suggested Fed Chair Jerome Powell will sound a more hawkish tone in his comments at the conference.

“Fed Chair Powell is likely to sound meaningfully more hawkish during his Jackson Hole speech on Friday morning at 10am ET than he did at his July 27th press conference, when he said the fed funds rate is already back to neutral,” Senyek said.

He added, “As we’ve previously discussed at length, we believe that Fed would have to hike the fed funds rate to 4.5%+ to set inflation on a sustainable path back toward the FOMC’s long-term 2% target.”

Airline stocks have shown a substantial move to the downside on the day, resulting in a 3.2 percent nosedive by the NYSE Arca Airline Index.

Significant weakness is also visible among oil service stocks, as reflected by the 3 percent tumble by the Philadelphia Oil Service Index.

The sell-off by oil service stocks comes amid a steep drop by the price of crude oil, with crude for September delivery plunging $3.58 to $87.19 a barrel.

Banking, computer hardware and semiconductor stocks are also seeing considerable weakness, moving lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan’s Nikkei 225 Index fell by 0.5 percent, while China’s Shanghai Composite Index rose by 0.6 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the German DAX Index has plunged by 2.5 percent, the French CAC 40 Index is down by 1.8 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

In the bond market, treasuries are seeing modest weakness, extending the steep drop seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.1 basis points at 3.0 percent.

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